Nvidia reported a strong performance for its fiscal fourth quarter, surpassing expectations with a revenue of $68.13 billion, marking a significant 73% increase year-over-year. This success comes amid rising demand for artificial intelligence (AI) technologies, which has calmed investor concerns about the sustainability of spending on AI hardware. Despite the positive financial results, challenges remain, particularly a global memory shortage and anticipated supply chain issues for the first quarter of fiscal 2027.
In a recent statement, Nvidia CEO Jensen Huang emphasized that market perceptions regarding the threat AI poses to the enterprise software industry are misguided. He argued that various software companies will leverage agentic AI to drive innovation and improve operational efficiency, rather than being replaced by it. “I think the markets got it wrong,” Huang stated. “Agents are tool users. All of these tools that we use today, whether it’s Cadence or Synopsys or ServiceNow or SAP, exist for a fundamentally good reason.”
Huang elaborated on the role of AI agents, suggesting that these intelligent systems will enhance productivity by utilizing existing software tools rather than replacing them. “Nobody’s going to service better than ServiceNow, and they’re going to come up with agents that are really fine-tuned and optimized for the work that uses the tools that they have,” he added.
Looking ahead, Huang mentioned ongoing discussions with OpenAI regarding a partnership agreement, indicating that the two companies are close to finalizing a deal. In September 2025, Nvidia and OpenAI announced a partnership valued at $100 billion, highlighting their commitment to advancing AI technologies.
Despite Nvidia’s positive outlook, the broader software service sector has faced downward pressure recently. Concerns linger over how AI’s growing capabilities might disrupt the industry in the long term. Dan Niles, founder of Niles Investment Management, noted that historical trends indicate new technologies often lead to market overcapacity, stating, “All of these things tend to get overbuilt — and then we figure out who the winners and losers are going to be.” He cautioned that not all companies would survive the transition, with some being particularly vulnerable to AI-driven automation.
In contrast, Gene Munster from Deepwater Asset Management expressed optimism about the future of AI, noting its rapid development. He suggested that AI is advancing at a pace that outstrips the comprehension of those not adopting these technologies.
Financial expert Jim Cramer, however, countered the notion of an existential threat to software firms. He argued that these companies are resilient, capable of adapting through mergers and other strategies to remain competitive. “The software companies are survivors,” he remarked. “They can merge. They can adapt. They can do whatever is really necessary to get it so they stay in business.” Cramer also pointed out that while many companies are currently priced for perfection, their market dynamics resemble a “rugby-scrum feel,” suggesting that they may not sustain their valuations in the long term.
As the AI landscape continues to evolve, companies in the software sector will need to navigate these challenges and opportunities carefully. The future may see both winners and losers emerge as the industry adapts to the changing technological environment.
This article is for informational purposes only and does not constitute investment advice. Readers are encouraged to conduct their own analysis or seek professional guidance before making investment decisions. It is important to remember that investments carry risks, and past performance does not guarantee future results.
