NextFin News - In a direct challenge to the growing market anxiety surrounding the future of the software industry, Nvidia CEO Jensen Huang dismissed the notion that artificial intelligence will render traditional software tools obsolete. Speaking at a Cisco AI event in San Francisco on Tuesday, February 3, 2026, Huang characterized the recent downturn in software valuations as a fundamental misunderstanding of how technology evolves. His comments come at a critical juncture as the tech-heavy Nasdaq Composite and the S&P 500 continue to face volatility, driven largely by a sector-wide rotation away from software-as-a-service (SaaS) providers.
The catalyst for the current market jitters was the recent release of advanced AI models, such as Google’s Project Genie, which demonstrated the ability to generate complex, explorable digital environments. According to reports from Reuters, these breakthroughs sparked fears that AI could bypass traditional development pipelines, leading to a sharp sell-off. The iShares Expanded Tech-Software Sector ETF (IGV) has plummeted nearly 22% year-to-date, with high-profile names like Palantir and AppLovin seeing double-digit declines in recent sessions. Investors have increasingly bet that generative AI will automate software creation to the point where established platforms become redundant.
Huang, however, argued that this narrative is "the most illogical thing in the world." Using a physical analogy, he questioned whether a humanoid robot would bother reinventing a screwdriver or a chainsaw when it could simply use the existing tool. "If you were an artificial general intelligence, would you use tools like ServiceNow and SAP and Cadence and Synopsys, or would you reinvent a calculator?" Huang asked. He emphasized that software defines the logic, rules, and interfaces that AI requires to operate. In his view, the most significant recent breakthroughs in AI are not about replacing tools, but about "tool use"—the ability of AI agents to interact with existing APIs and enterprise systems.
From an analytical perspective, Huang’s defense of the software industry highlights a shift from "software as a product" to "software as an infrastructure for agents." While the market is currently pricing in a disruptive replacement cycle, the structural reality suggests a symbiotic relationship. AI models, no matter how advanced, lack the deterministic reliability and governance frameworks inherent in enterprise software. For instance, a generative model can suggest code, but it cannot manage the lifecycle, security, and compliance of a global ERP system like SAP without the underlying software architecture. Data from recent industry adoptions shows that as AI scales, the demand for robust software foundations—drivers, compilers, and orchestration layers—actually increases to manage the added complexity.
The current market rout may be more indicative of a valuation correction than a terminal decline of the sector. During the 2023-2024 AI boom, many software companies were valued on the assumption of perpetual growth. As AI began to automate routine coding and administrative tasks, the "moat" of many mid-tier SaaS companies appeared to shrink. However, Huang’s focus on specialized tools like Cadence (electronic design automation) and Synopsys suggests that high-moat, specialized software remains indispensable. These tools provide the "ground truth" and precision that probabilistic AI models cannot yet replicate.
Looking forward, the trajectory of the tech industry likely involves a "co-evolutionary" phase. Rather than software disappearing, it will be re-engineered to be "agent-native." We are moving toward an era where the primary user of software is no longer a human clicking a mouse, but an AI agent executing a workflow. This transition will likely favor established players who can successfully integrate AI "tool-use" capabilities into their existing ecosystems. While the market remains skeptical, Huang’s position as the primary provider of the hardware powering this revolution lends significant weight to his claim: AI is not the end of software, but its most powerful user.
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