Nvidia CEO Jensen Huang said the markets got it wrong on software stocks during a keynote address on Monday [1].
This assessment comes as a challenge to current investor sentiment, suggesting that the financial markets are failing to account for the actual value generated by artificial intelligence in the software sector. While hardware providers like Nvidia have seen massive growth, software companies have struggled to maintain their valuations.
Huang delivered these remarks during the Nvidia GPU Technology Conference (GTC) in Taipei, Taiwan [1]. He said that the market has mispriced these assets, asserting that the current pricing does not reflect the reality of strong AI-driven demand [1].
The downturn in the sector is evident in broader market indicators. The iShares Expanded Tech-Software Sector ETF (IGV) has declined by more than 20% since the beginning of the year [2]. This trend persists even as infrastructure demand remains high.
Other industry leaders have noted similar disconnects between market pricing and operational growth. Thomas Kurian, CEO of Google Cloud, said that AI infrastructure demand would exceed supply for years to a decade [3].
Financial reports from Google Cloud illustrate the scale of this growth. In its latest quarter, the division reported revenue of $12.3 billion [3], representing a 28% increase year-over-year [3]. The company also reported an operating income of $2.2 billion for the same period [3].
Despite these figures, the semiconductor and software markets have faced volatility. Some analysts attribute recent tumbles in semiconductor stocks to warnings from OpenAI and ongoing supply constraints [3]. Huang, however, said that the software layer of the AI ecosystem is specifically undervalued [1].
“"The markets got it wrong on software stocks."”
The divergence between Nvidia's optimism and the 20% decline in the IGV software ETF highlights a critical tension in the AI trade. While the 'picks and shovels'—the chips and hardware—have seen immediate monetization, investors are skeptical about when software companies will translate AI integration into bottom-line profit. Huang's comments suggest that the value is already there, but the market is lagging in its recognition of the software-driven revenue cycle.
