(Yahoo! Finance) - Big Tech CEOs this week brushed aside worries that AI will evaporate the competitive moats of established software companies, even as those firms have seen their stocks plunge amid a steep, months-long sell-off.
Speaking during the Cisco (CSCO) AI Summit in San Francisco on Tuesday, Nvidia (NVDA) CEO Jensen Huang said, "There's this notion that the tool industry is in decline and will be replaced by AI … It is the most illogical thing in the world, and time will prove itself."
He continued, "If you were a human or robot — artificial general robotics — would you use tools or reinvent tools? The answer obviously is to use tools … like Service Now and SAP."
Palantir (PLTR) and Oracle (ORCL) have led declines in big enterprise software stocks this week, both down about 12% over the past three trading sessions. Salesforce (CRM), SAP (SAP), ServiceNow (NOW), Snowflake (SNOW), and Microsoft (MSFT) have also plummeted during the period.
Investors worry that such software-as-a-service (SaaS) firms could see their customers develop in-house software solutions using AI tools from large language model providers like Anthropic's (ANTH.PVT) Claude Code, reducing their reliance on providers like Salesforce. There is also concern that AI is lowering barriers for entirely new software players — including startups like Aurasell and Artisan AI — whose AI-native platforms could directly challenge the competitive advantages of established firms.
Those fears have deepened with the recent release of Anthropic's autonomous digital assistant Claude Cowork and new plug-ins for the agent that automate tasks for legal, sales, and marketing teams.
But Alphabet (GOOG, GOOGL) CEO Sundar Pichai and Rene Haas, CEO of British semiconductor firm Arm (ARM), echoed Huang's commentary, brushing aside those worries.
Asked about the gloomy market sentiment on software stocks in a post-earnings call on Wednesday afternoon, Pichai said that "just like it [AI] has been an enabling tool for us across our products and services ... I think the [software] companies who are seizing the moment ... have the same opportunity ahead."
AI helped Google Cloud revenue surge 48% from the previous year to $17.7 billion.
Pichai said Google's software customers — a group that includes Salesforce, Intuit (INTU), and ServiceNow — are "incorporating Gemini deeply in critical workflows" to improve their products.
Meanwhile, Haas called the fears prompting the software sell-off a "micro-hysteria," per the Financial Times.
Some analysts agree, telling Yahoo Finance last week that strict requirements for data governance, security, and compliance in the enterprise software space make it much harder for new entrants — and for firms developing their own solutions — than the market often realizes. They said it's also far too soon to tell which companies will be winners or losers, as enterprises are still in the very early stages of adopting AI tools.
Leading software companies have adamantly defended their competitive position in an increasingly AI-dominated market.
ServiceNow CEO William McDermott said in a call with analysts on Jan. 28, "The speculation of AI will eat software companies is out there. Let's clear it up with the facts."
He added, "AI doesn't replace enterprise orchestration. It depends on it."
