Investors dumped tech stocks in February, and the Nasdaq Composite (^IXIC) sank more than 4% in the past month as concerns about how AI could disrupt well-established industries roiled markets.
But Wall Street strategists see key distinctions between certain tech sector names in the near term.
“There was a stark contrast between the earnings of Nvidia (NVDA), which we do own, and Salesforce (CRM), which we don’t own,” Nancy Tengler, CEO of Laffer Tengler Investments, told Yahoo Finance.
The strategist sees the roughly 5% drop in Nvidia’s share price following the chipmaker’s quarterly earnings on Wednesday, along with the stock’s sideways performance so far this year, as a buying opportunity.
He argues that Nvidia looks cheap given the roughly $650 billion that hyperscalers like Microsoft (MSFT), Meta (META), Amazon (AMZN), and Alphabet (GOOGL, GOOG) are expected to spend this year on data centers running AI workloads on the chipmaker’s hardware.
“What we’ve heard from all the hyperscalers is that they just don’t have enough (computing) capacity and that’s how they generate revenue,” Tengler said. “One man’s capex is another man’s cash cow, and that’s Nvidia.”
On the other hand, Tengler said his company used to own shares of Salesforce but abandoned the position some time ago.
“We just didn’t see the growth trajectory,” Tengler said of Salesforce stock. “We thought there were better places to be.”
Read more: How to protect your portfolio from an AI bubble
Investors have recently questioned whether customers of software-as-a-service (SaaS) companies could develop in-house solutions using AI tools from large language model vendors like Anthropic’s Claude Code (ANTH.PVT), reducing their dependence on vendors like Salesforce.
Additionally, if AI increases productivity and reduces the number of employees needed to do work, it could impact traditional software pricing models, such as “seat” or headcount-based pricing.
“When you sell software on a job basis, you’re ultimately tied to the job market. That’s why we wanted to be in other places,” Tengler said.
Economists at Goldman Sachs have projected unemployment to rise this year from 4.3% to 4.5%, pointing to upside risks from faster adoption and greater displacement.
“If the number of seats is ultimately going to shrink over the next two years, that raises concerns,” said Melissa Otto, head of visible alpha research at S&P Global.
