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Investors rotated out of tech stocks in February, with the Nasdaq Composite (^IXIC) sinking more than 4% in the past month as concerns over how AI could disrupt well-established industries rocked markets.
But Wall Street strategists see key distinctions among certain names in tech in the near term.
“There was such a stark contrast between the earnings from 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% pullback 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.
She argues Nvidia looks inexpensive given the roughly $650 billion that hyperscalers such as Microsoft (MSFT), Meta (META), Amazon (AMZN), and Alphabet (GOOGL, GOOG) are expected to spend this year on data centers that run 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 is how you generate revenues,” Tengler said. “One man’s capex is another man’s revenue source, and that’s Nvidia.”
On the other hand, Tengler said her firm used to own Salesforce stock but exited the position some time ago.
“We just didn’t see the growth trajectory,” Tengler said of Salesforce shares. “We thought there were better places to be.”
Read more: How to protect your portfolio from an AI bubble
Investors have recently questioned whether software-as-a-service (SaaS) firms’ customers could develop in-house solutions using AI tools from large language model providers like Anthropic’s (ANTH.PVT) Claude Code, reducing their reliance on providers like Salesforce.
Additionally, if AI increases productivity and reduces the number of employees needed to do work, it could impact software’s traditional pricing models, such as “seat” or headcount-based pricing.
“When you’re selling software by seats, you’re tied to the job market, ultimately. So we wanted to be in other places,” Tengler said.
Goldman Sachs economists have projected a rise in unemployment this year from 4.3% to 4.5%, noting upside risks from faster adoption and larger displacement.
“If the number of seats are ultimately going to shrink in the next couple of years, that raises concerns,” said Melissa Otto, head of visible alpha research at S&P Global.
