Nvidia CEO Jensen Huang has pushed back against a widespread fear in tech: that artificial intelligence will destroy software companies. Speaking at Computex in Taiwan, Huang declared the opposite is true, suggesting that companies like Microsoft are actually entering an "incredible" time for growth. His comments challenge investor concerns that have weighed on Microsoft's stock, which has dropped about 17% over the past 12 months despite strong financial results.

What Did Jensen Huang Actually Say About AI and Software Companies?

Huang directly addressed the anxiety many investors feel about agentic AI, a next-generation technology that enables autonomous systems to organize, plan, and execute tasks without constant human direction. Unlike chatbots that respond to questions, AI agents can work independently across industries and sectors. Many feared this would make traditional software obsolete.

"A lot of people have said, 'Jensen, AI is coming. Agentic AI is coming. Therefore, all of the software companies are going to go out of business.' I said it's exactly the opposite," Huang stated.

Jensen Huang, CEO at Nvidia

Huang's optimism isn't purely theoretical. He pointed to real-world evidence: Alphabet, Google's parent company, faced similar doomsday predictions when AI chatbots emerged. Critics said search engines would become irrelevant. Instead, Alphabet integrated AI into its search product through AI mode and AI overviews, which actually boosted user engagement and advertising revenue. The company proved that AI could enhance rather than replace core business functions.

How Is Microsoft Already Using AI to Strengthen Its Business?

Microsoft has followed a similar playbook, embedding AI tools throughout its product ecosystem. The company's Microsoft 365 Copilot integration adds AI capabilities across its productivity suite, helping users analyze data, summarize documents, and complete tasks more efficiently. This approach mirrors Alphabet's strategy of making AI a feature that improves existing products rather than a threat to them.

The financial data backs up Huang's thesis. Microsoft's recent quarterly results reveal a company thriving in the AI era, not struggling against it:

• AI Revenue Growth: Microsoft's AI business surpassed a $37 billion annual run rate and increased by 123% year over year, showing explosive momentum in this emerging segment.
• Cloud Services Expansion: Azure and other cloud services revenue climbed 40% compared to the year-ago period, demonstrating sustained demand for infrastructure that powers AI systems.
• Overall Revenue Strength: In the third quarter of fiscal year 2026, ending March 31, total revenue increased 18% year over year to $82.9 billion, with adjusted earnings per share rising 21% to $4.27.
• Future Revenue Visibility: Microsoft's cloud backlog reached $627 billion at the end of the period, up 99% year over year, providing strong visibility into future revenue streams.

These numbers paint a picture of a company that is not just surviving the AI transition but accelerating through it. The 123% year-over-year growth in AI revenue is particularly striking, suggesting Microsoft's investments in AI infrastructure and integration are paying off.

Why Should Investors Care About Huang's Perspective?

Huang's comments matter because they address a key concern that has depressed Microsoft's stock valuation. Investors have worried that heavy capital expenditure on AI infrastructure won't translate into revenue growth if software companies lose relevance. If that were true, Microsoft's margins would shrink as expenses rose without corresponding revenue increases.

But Huang's argument, combined with Microsoft's actual financial performance, suggests this worry is misplaced. The company has multiple competitive advantages that position it well for the AI era. Microsoft benefits from a strong brand, long-standing partnerships with millions of businesses, and high switching costs that make it difficult for customers to abandon its products. These structural advantages mean that even as AI reshapes how software works, Microsoft's core relationships with enterprises remain valuable.

Microsoft's forward price-to-earnings ratio of 20.6 is also reasonable compared to the average of 22.3 for information technology stocks, suggesting the stock may be undervalued relative to its growth prospects and competitive position. The company's strong free cash flow and dividend program add another layer of investor protection.

What Does This Mean for the Broader AI Landscape?

Huang's optimism about software companies reflects a broader shift in how the tech industry views AI's impact. Rather than a disruptive force that destroys existing businesses, AI is increasingly seen as a tool that enhances them. Companies that successfully integrate AI into their existing products and services are likely to emerge stronger, not weaker. Microsoft's strategy of embedding Copilot across its productivity suite exemplifies this approach.

The key insight is that AI doesn't necessarily replace software; it makes software more powerful. A spreadsheet with AI-powered analysis tools is more valuable than a spreadsheet without them. A search engine with AI overviews provides better results than one without them. This dynamic suggests that established software companies with the resources to integrate AI effectively are actually well-positioned for the next phase of the technology revolution.

" }