Nvidia’s Jensen Huang was right when he told CNBC investors that the market “got it wrong” regarding the impact of artificial intelligence on software stocks. Fears that AI could render Software-as-a-Service (SaaS) obsolete, a phenomenon dubbed “Saaspocalypse,” had driven a significant sell-off, pushing the sector into bear market territory.
Speaking with CNBC following Nvidia’s earnings report, Huang emphasized that investors had overestimated AI’s disruptive potential. “I think the markets got it wrong,” he stated, describing the sell-off as “counterintuitive.” He posited that AI agents would not replace established software tools like web browsers or Microsoft Excel, but rather would “use these tools on our behalf and help us be more productive.”
Market watchers are now echoing Huang’s sentiment. Siddy Jobe, senior portfolio manager at Econopolis Wealth Management, told CNBC’s “Squawk Box Europe,” “The tools are there and will be amplified by AI and as such will be used more.” He specifically highlighted companies like Salesforce and ServiceNow, suggesting that the increased efficiency offered by AI integration will make their services more valuable and appealing to customers.
While Salesforce shares saw a dip following its fourth-quarter earnings, ServiceNow, which Huang identified as a leader in service software, traded slightly higher. However, Jobe cautioned against a blanket approach, advising investors to focus on “AI infrastructure software” – companies that provide the tools and platforms for AI developers to train and enhance their models. He pointed to U.S. firms Snowflake and Datadog as prime examples currently worth considering.
Neil Shah, VP of research and cofounder of Counterpoint Research, agreed that the broad market rotation out of software was partially misguided. “There is cannibalization happening, but this is a pivotal moment for SaaS companies to pivot their business model,” Shah explained. He anticipates a shift from service-based models to outcome-based models as SaaS companies integrate AI agents. “That transition has to happen fast for many of these SaaS companies, [and] whoever does that first will capture most of the market in this particular era,” he added, emphasizing the critical next two years.
Mitchell Green, founder and managing partner of Lead Edge Capital, concurred with Huang’s assessment. He noted that established software companies have historically adapted to disruptive technologies. “You have legacy software companies… compete with new types of incumbents — some incumbent, some new companies, will win. Sometimes the legacy companies take it away,” Green observed. He drew a parallel to IBM’s continued success with mainframes, a technology originating in the 1950s, to illustrate the longevity of well-positioned legacy players.
Earlier this week, analysts at HSBC released a note suggesting that AI’s mainstream adoption would significantly benefit the software sector. They argued, “Software is already eating AI.” The report indicated that while hardware and semiconductors have seen profitability from AI, the “lion’s share of value” is expected to be generated within software, a sector that has been actively developing agentic AI for the past two years, with a significant acceleration anticipated from 2026.
In pre-market trading, major software stocks showed a mixed performance. Intuit saw a marginal increase, while Microsoft experienced a slight decline. Cisco and CrowdStrike traded lower, whereas HP and CoreWeave posted modest gains. IBM shares jumped, reflecting continued investor interest. Nvidia, following its robust earnings, added nearly 1% in pre-market trading. In Europe, German software giant SAP saw its shares rise by 0.9%.
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