Key Facts
Nvidia CEO Jensen Huang stated that markets “got it wrong” regarding the impact of AI on software stocks. Following Nvidia’s fourth-quarter earnings report, which did not boost its own stock, software stocks saw a rebound, showing resilience despite fears of disruption from AI competitors. This year, the software industry, valued at over $1 trillion, has faced significant declines, with major players like Microsoft seeing a 28% drop from their peak.
Huang emphasized that existing software programs like Microsoft Excel will integrate AI features rather than face extinction. Despite concerns, robust earnings continue to emerge from software companies, indicating possible undervaluation in the sector. Investors now have opportunities to capitalize on the downturn, particularly through the iShares Expanded Tech-Software Sector ETF, down 31% from its peak, and Microsoft, currently trading at a price-to-earnings ratio of 25.
