The AI trade is making a comeback

Big Tech’s biggest juggernaut has once again proven the haters wrong.

Yesterday afternoon, three tech heavyweights—Nvidia, Salesforce, and CrowdStrike—told investors exactly what they were hoping to hear, and proved some bearish fears unfounded.

Shares of Nvidia soared 8.74% today on the news that it expects 70% sales growth in its next fiscal year, handily beating Wall Street forecasts of 45%. As for last quarter, revenue came in at $96.2 billion, more than double the same quarter last year.

Since investors see Nvidia as a bellwether for the rest of the AI trade, how the company performs during earnings influences whether people see the circular web of AI financing as a dangerous cycle—or a wise series of bets financing a transformative technology.

“Management delivered a compelling vision of how strategic investments help NVDA secure its dominance in this once-in-a-generation AI buildout,” explained Bank of America research analyst Vivek Arya, reiterating his Buy rating and $350 price target—53.5% higher than shares trade today.

Software flips the script

The king of chips wasn’t the only old dog showing off its new tricks. Software incumbents, which were declared all but dead after it seemed like AI would tear through the sector like wildfire, are having a kind of renaissance this earnings season.

You may not know exactly what the company does, but you know that Salesforce is as synonymous with software as it gets. The firm, which owns business messaging system Slack and data platform Tableau, delivered an A+ quarter yesterday, and issued better-than-expected forward-looking guidance. The company specifically touted a $2.6 billion gain on strategic investments, thanks to its stake in Anthropic. Shares jumped 22.58% today.

“This SaaSpocalypse narrative has been such nonsense,” Marc Benioff told CNBC Wednesday morning. He argued that instead of erasing the need for software companies like Salesforce, AI actually makes them more necessary.

And AI is boosting another corner of software: cybersecurity. CrowdStrike popped 20.5% today after it, too, beat the Street’s expectations and raised its fiscal Q2 forecast.

Unlike other companies that are getting an efficiency boost from AI, cybersecurity is getting a helping hand from the technology, in a perhaps counterintuitive way: As cyberattacks become better and more damaging, demand for CrowdStrike’s products is higher than ever.

“We are in an arms race,” CrowdStrike CEO George Kurtz said during a call with analysts. “AI is driving a clear divide between the cybersecurity companies that solve problems and those that compound problems.”

AI may not wipe out entire sectors the way investors once feared, but it will likely keep widening the gap between the winners and losers.—LB