Nvidia CEO Jensen Huang on Wednesday said markets have miscalculated the AI threat to software companies, hours after the chip behemoth issued an upbeat sales forecast on strong AI demand.
“I think the markets got it wrong,” Huang told CNBC’s Becky Quick, pushing back on fears that AI agents will cannibalize the enterprise software industry.
Instead, they expect a wide range of software firms to use agent AI to develop their software and increase efficiency.
In what he describes as “contradictory,” Huang said AI agents don’t replace these software tools, but instead use them.
“This is why we say agents are tool users,” he said.
He mentioned the internet browser and MicrosoftExcel examples of tools used by AI agents.
“All these tools we use today, be it cadence Or summaries Or Service now Or SAPThese tools exist for a fundamentally good reason. This agent is AI intelligent software that uses these tools on our behalf and helps us be more productive,” Huang added.
“Nobody’s going to serve better than ServiceNow, and they’re going to come up with agents that are really good and optimized for the job using the tools they have.”
“Ultimately, we need tools to finish their work and put the information in a way that makes sense to us,” he said.
The comments came after Nvidia reported that its revenue for the fiscal fourth quarter rose 73% from a year earlier to $68.13 billion, beating analysts’ estimates of $66.21 billion.
The company gave upbeat guidance for the fiscal first quarter with revenue of $78 billion, plus or minus 2%, above analysts’ forecasts for $72.6 billion.
Investors fretted that the massive spending on AI hardware was unsustainable, raising fears of a bubble building in the sector.
Shares of the software services provider have taken a beating in recent months. While analysts have warned that AI will “eat” software in the long run, those risk views and the fundamentals behind the recent sell-offs remain divided.
Software stocks were mixed in after-hours trading after Huang’s remarks. The summary fell 3.6% and the cadence fell 0.9% after the market closed. ServiceNow was little changed while SAP was up 0.3%.
“People have to remember everything — whether it’s railroads, canals, the Internet, all these things get overbuilt — and then we figure out who the winners and losers are going to be,” Dan Niles, founder and portfolio manager at Niles Investment Management, told CNBC after Huang’s interview.
Niles warns that not all companies will emerge unscathed as AI threatens to automate workflows, squeeze prices and lower barriers for new competitors entering the market.
“Some real companies in the software space are going to zero,” Niles said. The most resilient players will be in the database and cyber security sectors, he said.
Nvidia shares rose 2% in extended trading after the quarterly earnings report.
A selloff in software stocks this year has weighed on the S&P 500 Software & Services Index, which had lost nearly 23% by Wednesday’s market close.
CNBC’s Jim Cramer, however, dismissed the doomsday prediction, suggesting that fears over an AI-fueled existential threat to software companies are overblown and that the reality is less dire.
“Software companies are survivors. They can merge. They can adapt. They can do whatever it takes to really get by so they stay in business,” Cramer said Wednesday on “Mad Money.”
“Yet they value perfection, and they seem to have a sort of rugby-scrum feel about them – and we don’t pay for scrums,” he said.
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