New AI Tools Spark Sell-Off in Software Stocks
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1h ago
0mins
Should l Buy NVDA?
Source: Newsfilter
- Market Panic Intensifies: The release of new AI tools by Anthropic has triggered a broad sell-off in software and data stocks, with the S&P 500 Software & Services Index dropping over 4% on Thursday, marking an eight-day losing streak and a year-to-date decline of approximately 20%, reflecting concerns over traditional software business models.
- Divergent Executive Views: Despite the market turmoil, Nvidia CEO Jensen Huang and Arm Holdings CEO Rene Haas argue that AI will not replace enterprise software but will enhance existing tools, with Haas labeling the market panic as 'micro-hysteria,' indicating a divide in industry perspectives on the long-term impact of AI.
- Hedge Fund Short Selling: As of Wednesday, approximately $24 billion in software stocks have been shorted by hedge funds, highlighting investor pessimism about the software sector's outlook, although analysts suggest that the impact of AI on software providers is likely to be short-lived, as enterprises will not easily abandon their existing investments.
- Complex Industry Outlook: Analysts warn that AI could pressure software profits and limit pricing capabilities, although key players like Oracle and ServiceNow are seen as having a sustained 'right to earn,' suggesting that the future of the software industry remains uncertain in the age of AI.
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Analyst Views on NVDA
Wall Street analysts forecast NVDA stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for NVDA is 264.97 USD with a low forecast of 200.00 USD and a high forecast of 352.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
41 Analyst Rating
39 Buy
1 Hold
1 Sell
Strong Buy
Current: 174.190
Low
200.00
Averages
264.97
High
352.00
Current: 174.190
Low
200.00
Averages
264.97
High
352.00
About NVDA
NVIDIA Corporation is a full-stack computing infrastructure company. The Company is engaged in accelerated computing to help solve the challenging computational problems. The Company’s segments include Compute & Networking and Graphics. The Compute & Networking segment includes its Data Center accelerated computing platforms and artificial intelligence (AI) solutions and software; networking; automotive platforms and autonomous and electric vehicle solutions; Jetson for robotics and other embedded platforms, and DGX Cloud computing services. The Graphics segment includes GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise workstation graphics; virtual GPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems, and Omniverse Enterprise software for building and operating industrial AI and digital twin applications.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- AI Rack Shipments Rise: The company noted that shipments of AI racks continue to increase, highlighting its advantageous position in the rapidly growing AI market, which is expected to further boost overall performance.
- Seasonal Performance Outlook: Foxconn anticipates that the current quarter's seasonal performance will exceed the range of the past five years, reflecting a positive outlook on market demand that could have a favorable impact on its stock price.
- Competitive Market Position: As the world's largest server manufacturer, Foxconn's robust performance suggests enhanced competitiveness in the smart consumer electronics sector, potentially attracting more investor interest in its future growth prospects.
See More
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- Nvidia's Market Leadership: Despite increasing competition, Nvidia remains the leader in AI infrastructure, with its graphics processing units (GPUs) widely regarded as the best for training and powering AI models, and is expected to benefit as AI data center spending continues to grow.
- Broadcom's Custom Chip Advantage: Broadcom is assisting hyperscale data centers in designing custom AI chips, with its AI revenue projected to increase fivefold over the next two years, highlighting its critical role in the AI infrastructure buildout.
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See More
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- Tech Sector Decline: Qualcomm's (QCOM) forecast of weaker-than-expected Q2 revenue led to an over 8% drop in its stock, triggering a sell-off across the tech sector, with the Nasdaq 100 index hitting a 2.5-month low, indicating waning investor confidence in technology stocks.
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- Earnings Season Impact: Despite 150 S&P 500 companies set to report earnings this week, market focus on economic data intensifies, with S&P 500 earnings expected to grow by 8.4% in Q4, yet overall market sentiment remains suppressed by recent economic weakness.
See More
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- Underperformance Noted: Despite positive developments in self-driving technology, Tesla is underperforming in 2026, with a 12% decline compared to a 2% drop in the Nasdaq 100, indicating significant market pressure and investor skepticism.
- Safety Monitor Removal Proposal: Investor Gary Black suggests that Tesla should remove safety monitors from its robotaxis to alleviate doubts about its unsupervised self-driving capabilities, which could enhance market confidence in the company's future.
- New Pickup Truck Design: Black emphasizes that launching a new pickup truck that aligns more closely with conventional designs could help Tesla recover its stock performance, projecting that even a 10% market share could add $1.20 per share to earnings, reflecting a 40% increase in 2027 earnings.
- Musk's Stock Purchase: Black also highlights that if CEO Elon Musk were to purchase additional shares, it would send a strong confidence signal to investors, potentially boosting both investor sentiment and Tesla's stock performance.
See More
Software Sector Faces AI Tool Shock
- Market Panic Intensifies: The release of new AI tools by Anthropic has triggered a sell-off in software-as-a-service and data provider stocks, with the S&P 500 Software & Services Index dropping over 4% on Thursday and down about 20% year-to-date, indicating market concerns over traditional software business models.
- Divergent Views on AI: While Nvidia CEO Jensen Huang and Arm Holdings CEO Rene Haas argue that AI will enhance existing software tools rather than replace them, there remains a split among analysts regarding the long-term impact of AI on the software industry, with some warning that AI could compress profit margins.
- Hedge Fund Shorting Strategy: As of Wednesday, approximately $24 billion in software stocks have been shorted by hedge funds, reflecting a pessimistic outlook on the future of the software sector, although some analysts describe this panic as
See More
Wall Street Punishes Software Stocks Amid AI Concerns
- Historic Selloff: Wedbush analyst Dan Ives noted that Wall Street's punishment of software stocks like Salesforce, ServiceNow, and Microsoft is unprecedented, indicating a significant decline in investor confidence that could lead to a potential 5% loss in customers over the next few years.
- AI Challenges: Ives emphasized that while AI is disrupting the software industry, the notion that software companies have become irrelevant is overly extreme, suggesting that there is still room for survival, particularly citing Palantir as an example of software's adaptability in the new landscape.
- Weak Market Performance: According to Benzinga Edge Stock Rankings, Salesforce shows weak price trends across short, medium, and long-term horizons, along with a low value ranking, reflecting pessimistic market expectations for its future growth, which could impact its financing and investor confidence.
- Shift in Investor Sentiment: Ives pointed out that current market sentiment indicates a cautious attitude among investors towards the future of software companies, suggesting that their competitiveness in the AI era is under threat, which may lead to broader industry adjustments and reevaluations.
See More
