Although software stocks have recovered slightly on Wall Street recently, the iShares Expanded Tech Software Sector ETF(NYSEMKT:IGV) It is still down more than 20% since the start of the year by the close of trading on Tuesday. Investors are reducing their terminal multiples in these stocks, and selling them due to concerns that artificial intelligence (AI) will be able to create similar software products and services more quickly and efficiently.
From cloud to complex, ChatGPT’s modules are certainly effective, and they can complete a range of tasks well. So it’s understandable that investors and consumers are unsure about what the tech world will look like in the future. However, in a recent interview with CNBC, Nvidia CEO Jensen Huang said the “markets got it wrong” in enterprise software. Here is his reason.
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Concerns about where the trend is headed have increased as AI companies have released new agentic AI tools and chatbots that can not only answer questions and create certain types of content when prompted, but can also perform tasks that might otherwise require more time.
For example, CloudWorks can perform a variety of tasks, such as organizing files, summarizing Slack or email conversations, and automating workflows.
Cloud developer Anthropic has also released new agentic AI tools that can help in specific job areas such as wealth management, investment banking, and human resources. For example, these tools can review deals, perform portfolio analysis, or generate instructional materials for the company’s latest hires.
Perplexity CEO Aravind Srinivas recently retweeted a user who claimed to have used Perplexity’s $200-per-month computer system to build a terminal that analyzes real-time data for Nvidia stock, mimicking the services provided by Bloomberg’s terminal-dedicated machines that cost users $30,000 a year.
It’s easy to see why investors and buyers are concerned. However, Huang argues that agentic AI will not replace current enterprise software products and services; It will use them on behalf of the people.
It is very likely that these (software) companies we are talking about introduce agents that run on their platforms. You know, these agents, of course, they have to be experts in what they do, and no one knows better than customer service. service nowand they will come up with agents that are really well organized and optimized for the type of work that uses the tools that they have.
Huang suggested that people should think about agentic AI in the same way that they would imagine the behavior of physical robots. Ultimately, he suggests, when people have robots in their homes, it’s unlikely that those robots will recreate the products and tools they need to do their jobs. For example, he said, if a household robot is given the task of heating food, it is unlikely that it will try to turn on another version of the microwave; It will only use the microwave that is already in the kitchen.
Ultimately, Huang hopes that agent AI tools will help humans and increase their productivity. If software engineers don’t have to spend a lot of time writing the actual code, but can instruct agents to write the code as they want, they will be able to complete their work more efficiently than ever before.
I think Huang’s argument that AI will prove to be more of an assistant than a product replacement makes some sense. Think about how the Internet has enabled people to complete tasks remotely that would normally require them to travel, giving them more time to do other things. The Internet has also created many new jobs and companies.
However, I think it is unclear now where these new jobs will come from. If AI could write computer code on command, presumably, fewer software engineers would be needed.
Citadel Security market strategist Frank Flatt wrote in a recent blog post that job postings for software engineers are on the rise, as are new business structures. However, the question arises as to whether these new jobs can actually offset the rate of job loss from automation that is occurring. I haven’t seen many experts actually answer this question with anything other than a vague claim that there will be new opportunities as a result of AI and that humans won’t be eliminated from the job market entirely.
Until there are more specifics, I think many buyers will remain concerned, and many software stocks will remain under pressure if investors believe their wallets are being destroyed by rapidly emerging AI technology.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has and offers positions in Nvidia and ServiceNow. Motley Fool has a disclosure policy.
Nvidia CEO Jensen Huang Says ‘Markets Got It Wrong’ Software Stock Originally Posted by Motley Fool
