Jensen Huang Challenges Market View on Software Sector, Highlights One Stock Amid Sell-Off

Nvidia CEO Jensen Huang has voiced skepticism about the recent selloff in software-related equities, asserting that broader market trends are overlooking fundamental strength in the sector. Speaking during a recent industry panel, Huang emphasized that AI-driven demand for software infrastructure remains robust, despite short-term volatility. He cited a 12% decline in the NASDAQ Computer Software Index over the past month as evidence of overreaction, calling the correction 'disconnected from underlying innovation.' Huang specifically pointed to a single company—Apple Inc. (AAPL)—as a strategic opportunity amid the downturn. He noted that AAPL’s recent $3.1 billion investment in cloud-based AI services and its integration of on-device machine learning features across iOS and macOS signal sustained software monetization potential. The stock has dropped 8.4% in the last 30 days, underperforming the broader S&P 500, which gained 1.2% during the same period. The divergence raises questions about investor psychology versus long-term fundamentals. While software valuations have compressed—average P/E ratios for the sector now stand at 28.7, down from a 34.2 peak in late 2024—Huang argues that embedded AI capabilities in enterprise and consumer products are accelerating revenue sustainability. He cited a 22% year-over-year increase in Apple’s services revenue, which now contributes 25% of total company earnings, as proof of durable software demand. Market participants are closely watching the reaction to Huang’s comments. Analysts note that a potential reversal in sentiment could benefit not only AAPL but also related cloud infrastructure providers. The S&P 500 Software & Services Index has seen a 6.9% increase in trading volume over the past week, suggesting heightened interest in defensive tech exposure. Meanwhile, oil prices (CL=F) have remained stable, indicating that macroeconomic factors are not driving the software sector’s recent move.