In a series of recent discussions that have captured the attention of Wall Street, Nvidia Chief Executive Jensen Huang has articulated a contrarian view regarding the current valuation of the software sector. While the hardware side of the artificial intelligence revolution has seen unprecedented capital inflows, Huang suggests that the financial markets are failing to account for the massive secondary wave of value creation currently brewing within software enterprises.
The logic behind the market’s current hesitation is easy to trace. For the past eighteen months, investors have funneled billions into the physical infrastructure of AI, namely the high-end GPUs and data centers that Nvidia provides. This has led to a lopsided investment landscape where the ‘shovels’ of the gold mine are priced at a premium, while the companies building the actual applications remain under scrutiny. Huang argues that this perspective ignores the fundamental cycle of technological adoption, where hardware serves as the initial catalyst for a much larger software explosion.
According to Huang, the rise of accelerated computing represents a platform shift that is fundamentally different from the mobile or cloud eras. In those previous cycles, software companies often had to wait years for hardware to become powerful enough to support complex applications. Today, the hardware capability is scaling at an exponential rate, meaning the bottleneck is no longer the machine, but the speed at which developers can integrate generative capabilities into their existing workflows. Huang believes the market is underestimating the operating leverage that will be unlocked once these software firms fully automate their core product offerings.
One of the key points Huang emphasizes is the concept of the ‘AI worker.’ In the traditional software model, value was derived from tools that helped humans do work more efficiently. In the new paradigm, software is becoming the work itself. This shift from tool to agent represents a massive expansion of the total addressable market for software firms. When a software package moves from being a word processor to being a researcher, writer, and editor all in one, the pricing power of that company should, in theory, increase by several orders of magnitude. Yet, current stock prices for many enterprise software giants do not yet reflect this transition from per-seat licensing to value-based outcomes.
Furthermore, Huang points to the deep integration of Nvidia’s own CUDA platform with the global software ecosystem as a sign of what is to come. He suggests that we are witnessing the birth of a new industrial base where software is the primary manufactured product. Just as the industrial revolution turned raw materials into physical goods, the AI revolution turns data into intelligence. The companies that own the proprietary data and the customer relationships are the ones positioned to capture the long-term tailwinds of the investments currently being made in hardware.
Critics of this view often point to the ‘AI fatigue’ seen in corporate earnings reports, where CEOs express concern over the high costs of implementation versus the immediate return on investment. Huang counters this by noting that the complexity of modern software requires a foundational rebuilding of the tech stack. This process is not instantaneous. He draws parallels to the early days of the internet, where skepticism was high until the infrastructure reached a critical mass that allowed for the birth of global digital economies.
Ultimately, the Nvidia founder’s message to investors is one of patience and structural understanding. While the hardware layer is the most visible sign of progress, it is the software layer that will eventually dictate the productivity gains of the global economy. By focusing solely on the chips and the servers, the market may be missing the most significant wealth creation event of the decade. As these software companies begin to report meaningful revenue from autonomous agents and integrated AI assistants, the disconnect between current market sentiment and reality is likely to close rapidly.
