Nvidia CEO Jensen Huang stated Wednesday markets have miscalculated the AI menace to software program corporations, hours after the chip behemoth issued an upbeat sales forecast on sturdy AI demand.
“I think the markets got it wrong,” Huang advised CNBC’s Becky Quick, pushing again on fears that AI brokers will cannibalize the enterprise software program business.
Instead, he expects a broad swath of software program companies to make use of agentic AI to develop their software program and increase effectivity.
In what he described as “counterintuitive,” Huang stated that AI brokers will not change these software program instruments, however will use them as an alternative.
“That’s the reason why we also say agents are tool users,” he added.
He cited the web browser and Microsoft‘s Excel as examples of instruments that AI brokers will use.
“All of those instruments that we use right now, whether or not it is Cadence or Synopsys or ServiceNow or SAP, these tools exist for a fundamentally good reason. These agentic AI will be intelligent software that uses these tools on our behalf and help us be more productive,” Huang added.
“Nobody’s going to service better than ServiceNow, and they’re going to come up with agents that are really fine-tuned and optimized for the work that uses the tools that they have.”
“In the end, we need the tools to finish their work and put the information back in a way that we can understand,” he stated.
The feedback got here after Nvidia reported that its income for the fiscal fourth quarter climbed 73% to $68.13 billion from a 12 months earlier, beating analysts’ estimates for $66.21 billion.
The firm additionally issued an upbeat steering with income for the fiscal first quarter to be $78 billion, plus or minus 2%, effectively above analysts’ forecast for $72.6 billion.
Investors had grown weary that the huge run-up in spending on AI {hardware} won’t be sustainable, stoking fears of a bubble constructing within the sector.
Shares of software program service suppliers have taken a beating in current months. While analysts have sounded the alarm that AI will “eat” software program over the long run, views on that threat and the basics behind the newest sell-off appeared divided.
Software shares have been combined in after-hours buying and selling following Huang’s remarks. Synopsys tumbled 3.6% after market shut, and Cadence dipped 0.9%. ServiceNow was little modified whereas SAP edged 0.3% greater.
“People need to remember that all everything — whether it’s the railroads, canals, the internet, all of these things tend to get overbuilt — and then we figure out who the winners and losers are going to be,” Dan Niles, founder and portfolio supervisor of Niles Investment Management, advised CNBC after Huang’s interview.
Niles warned that not all corporations will emerge unscathed as AI threatens to automate workflows, squeeze costs, and decrease boundaries to new rivals getting into the market.
“There’s some real companies that are going to go to zero in the software space,” Niles stated. He added that probably the most resilient gamers can be within the database and cybersecurity sectors.
Nvidia shares rose as a lot as 2% in prolonged buying and selling after the quarterly earnings report.
The selloff in software program shares this 12 months has weighed on the S&P 500 software program and providers index, which has misplaced almost 23% as of Wednesday’s market shut.
CNBC’s Jim Cramer, nevertheless, rejected the doomsday prediction, suggesting that fears over an AI-fueled existential menace for software program corporations have been overblown and the fact is much less dire.
“The software companies are survivors. They can merge. They can adapt. They can do whatever is really necessary to get it so they stay in business,” Cramer stated Wednesday on “Mad Money.”
“They’re priced for perfection, though, and they do seem to have, let’s say, kind of a rugby-scrum feel about them — and we don’t pay up for scrum,” he added.
