As software stocks plunge, Jensen Huang refutes the "AI replacement" theory: This is the most illogical thing in the world.
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In response to the recent global sell-off in software stocks triggered by the launch of AI automation tools, NVIDIA CEO Jensen Huang firmly refuted the notion at the San Francisco AI conference, stating that the view that AI will replace software tools is “extremely illogical.”
On February 4, at a conference hosted by Cisco, Jensen Huang pointed out that the idea that AI will render software companies unimportant is misleading. He emphasized that both humans and intelligent agents choose to use existing tools rather than reinvent them, explaining that the core breakthrough in AI is the “ability to use tools.” He said:
“There is a view that software industry tools are declining and will be replaced by artificial intelligence… This is the most illogical thing in the world, and time will prove everything.”If you are human or a robot, or artificial intelligence or a general-purpose robot, would you use existing tools or reinvent them? The answer is obviously to use existing tools… That’s why the latest breakthroughs in AI are all related to the use of tools, because these tools were originally designed to clearly execute tasks.”
Before these remarks, the launch of new automation tools by AI startup Anthropic had already triggered widespread market concerns about the future of the software industry, quickly sparking panic selling on a global scale. All three major U.S. stock indices fell, and the sell-off soon spread to Asian markets. On Wednesday, India’s IT export index plunged 6.3%, with Infosys tumbling 7.3%. In Japan, recruiting company Recruit Holdings and Nomura Research Institute shares fell by 9% and 8%, respectively.
Jensen Huang Urges Rapid Corporate Action
At the San Francisco AI conference, NVIDIA CEO Jensen Huang systematically elaborated on his assessment of how AI is reshaping the computing industry. He said that the computing industry is undergoing its “first restructuring in 60 years,” and its essence is a shift from “explicit programming,” in which developers write specific instructions, to “implicit programming,” where users simply state their goals and the system plans and executes the process independently.
On corporate practice, Huang advised management to go beyond the mechanical calculation of short-term investment returns and instead focus on identifying the company’s most influential core workflows and deploying AI there first. He emphasized the need to encourage widespread experimentation, promoting multiple parallel projects with a “let a thousand flowers bloom” strategy. He also revealed that NVIDIA itself uses a diversified AI portfolio, including Anthropic, Codex, and Gemini.
Huang once again explicitly refuted the common view that AI will simply replace existing software tools, calling it “extremely illogical.” He compared enterprise software to screwdrivers and hammers, pointing out that even the most advanced AI systems (whether robots or digital intelligent agents) have a reasonable role only as “users of tools,” not “re-inventors of tools.”
Stephen Yiu, Chief Investment Officer of Blue Whale Growth Fund, commented:
“2026 will be the key year to determine which companies are AI winners or victims, and the core investment skill is to avoid losers. Taking a contrarian position against the tide of AI transformation before the industry landscape settles will be dangerous.”
Anthropic Sparks AI Replacement Fears
The productivity tool for in-house corporate lawyers launched by Anthropic was the trigger for this round of sell-offs.
The iShares Expanded Tech-Software Sector ETF, which tracks the technology software sector, hit a new daily low, falling 5.6%, marking a six-day losing streak and a cumulative drop of more than 14%. The ETF fell about 15% in January, the worst single-month performance since 2008. The S&P North American Software Index plunged 15% in January, the largest single-month drop since October 2008.
Jefferies equity trader Jeffrey Favuzza described the market reaction as the “SaaSpocalypse” (Software-as-a-Service apocalypse), noting that trading style has shifted to panic selling regardless of cost, saying:
“People are just selling everything, not caring about the price.”
Even software giants like Microsoft have not been immune to broad market skepticism. Despite solid quarterly earnings last week, investors have focused on the slowdown in cloud business sales growth and have begun re-evaluating the prospects for returns on its massive AI capital expenditures, causing its stock price to plummet 10% in a single day last Thursday, and intraday losses exceeded 3% on Tuesday. In January, Microsoft shares posted their worst monthly performance in over a decade.
Market pessimism is evolving from a reaction to specific AI tools to a systemic re-evaluation of the overall business model of the software industry. Bloomberg data shows that in this earnings season, only 67% of S&P 500 software companies that have reported earnings exceeded expectations, far below the 83% success rate for the broader tech sector. Investment firm Piper Sandler downgraded several software companies, including Adobe, Freshworks, and Vertex, on Monday. Analyst Billy Fitzsimmons pointed out worries that:
“Seat compression and ‘ambient coding’ narratives may set a cap on industry valuation multiples.”
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