I had no intention of disagreeing with the so-called "deity" of AI chips—more formally known as NVIDIA (NVDA) founder and CEO Jensen Huang.
However, on this occasion, regarding the AI stock sell-off we are witnessing, I must counter Huang, who is often seen sporting a leather jacket.
It was reported that Huang stated at an AI event hosted by networking equipment giant Cisco (CSCO) on Tuesday: "There's a view that tools in the software industry are in decline and will be replaced by AI... That is the most illogical statement in the world, and time will tell. If you are a human or a robot, a general AI agent, would you choose to use tools or reinvent them? The answer is obviously to use tools... That's why the latest breakthroughs in AI revolve around tool usage, because these tools are designed from the outset to be explicitly usable."
At this critical moment for tech investors, the market paid little heed to Huang's comments on the topic. Admittedly, Huang often influences market sentiment, partly because NVIDIA itself acts as a market "bellwether."
But the market is convinced that as AI technology rapidly iterates, the terminal value of software companies like Salesforce (CRM), Workday (WDAY), Thomson Reuters (TRI), SAP (SAP), and ServiceNow (NOW) is at risk.
Consider the actions of AI startup Anthropic (ANTH.PVT) last Friday. Previously operating somewhat under the radar, the company has now ignited a fresh wave of software stock selling on top of the existing 2026 downturn.
Anthropic launched a suite of plugins for its Claude collaborative agent, designed to automate tasks across various domains including legal, sales, marketing, and data analysis.
By Tuesday's close, stocks like Thomson Reuters, LegalZoom.com (LZ), PayPal (PYPL), Expedia (EXPE), Experian (EFX), and Intuit (INTU) had all plunged by double-digit percentages. Following today's sharp correction, these assets found almost no buyers.
The broader U.S. software index plummeted nearly 5%, with 104 components declining and only 9 advancing. This marks the index's sixth consecutive day of losses, bringing it back to levels seen in April.
Deutsche Bank strategist Jim Reid wrote in a report: "Although the question of the ultimate winners in AI is unlikely to be answered in 2026, the market has clearly shifted in recent months from AI euphoria towards placing greater emphasis on corporate differentiation and growing concerns about AI disrupting existing business models."
Just imagine, aren't other model developers working on features similar to Anthropic's? Do you truly believe that Anthropic, led by the 'sibling duo' Dario and Daniela Amodei, won't aggressively promote such AI tools in an attempt to render traditional software companies obsolete? Their sole objective is to create greater value for Anthropic's investors! They couldn't care less about the feelings of Salesforce's Marc Benioff (whose stock has plunged 42% over the past year, affected by AI fears).
Of course, model developers are bound to push forward full throttle. The problem is that bloated legacy software companies simply cannot pivot as swiftly as the emerging model developers.
The reality is that the valuation recalibration for software stocks will persist until the market fully prices in the risks to their terminal value.
Kirk Materne of Evercore stated: "The software sector is facing increasingly negative sentiment, and every new AI release perceived by investors as disruptive to the software industry further amplifies this mood. A common thread in almost every software downturn is that once the sector bottoms, it tends to outperform the S&P 500. The trickier question is how much more pain must be endured before that bottom is reached, and there is currently no 'magic bullet' to change market sentiment."
Now, that is a viewpoint I wholeheartedly endorse!
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