NextFin News - On February 4, 2026, the global technology sector faced a significant divergence as a sharp selloff in software equities, triggered by breakthroughs from AI labs like Anthropic, began to bleed into the broader semiconductor market. Nvidia, the bellwether for the artificial intelligence era, saw its shares caught in the crossfire of this volatility. However, prominent analysts are now sounding the alarm that this sympathetic decline is fundamentally irrational. According to Wolfe Research, the market is failing to distinguish between software companies facing existential disruption and the hardware providers whose infrastructure is required to facilitate that very disruption.
The current market turbulence stems from a "wake-up call" regarding AI's ability to automate complex software development and service tasks, leading investors to dump traditional SaaS (Software as a Service) stocks. As these software giants fell, Nvidia’s stock experienced a "cool-off" period, which Wolfe Research analyst Chris Caso describes as a premier buying opportunity rather than a signal of structural weakness. Caso argues that while software valuations are being compressed by competitive AI threats, Nvidia’s fundamental position as the sole provider of the necessary "picks and shovels" for this gold rush remains not only intact but strengthened.
The disconnect between market sentiment and fundamental reality is best illustrated by the valuation metrics. Following the recent price adjustment, Nvidia is currently trading at approximately 16 times its projected fiscal year 2028 earnings. This is a remarkably low multiple for a company that continues to dominate a high-growth sector. Wolfe Research has notably raised its FY28 earnings per share (EPS) estimate for Nvidia to $11.50, which sits roughly $1.50 above the current Wall Street consensus. This bullish revision is driven by two primary factors: the anticipated volume growth of the upcoming Rubin and Rubin Ultra platforms and the company’s demonstrated ability to maintain premium pricing power despite a more cost-conscious environment under the administration of U.S. President Trump.
From an analytical perspective, the software selloff actually serves as a catalyst for increased hardware demand. When AI models become more efficient or capable—as seen with recent releases from Anthropic—the immediate reaction is a fear that software seats will be reduced. However, the secondary effect is a massive surge in compute requirements to run these more sophisticated models at scale. This creates a paradoxical environment where the "software's loss" is the "hardware's gain." The Rubin architecture, scheduled for a 2026 rollout, is designed specifically to handle the next generation of agentic AI, ensuring that Nvidia remains the gatekeeper of the industry's progress.
Furthermore, the macroeconomic backdrop under U.S. President Trump has emphasized domestic technological sovereignty and high-end manufacturing. While trade tensions and tariff discussions often create short-term noise in the semiconductor space, Nvidia’s critical role in national AI infrastructure provides a level of strategic insulation. The company’s transition from a pure chip designer to a full-stack data center provider means it is capturing a larger share of the total IT spend, even as individual software budgets are scrutinized. Caso notes that the seasonal patterns of sluggish performance in the early months of the year are being misinterpreted by the market as a loss of momentum, when in fact, the product roadmap suggests a massive earnings inflection point is approaching.
Looking ahead, the trajectory for Nvidia appears decoupled from the software sector's identity crisis. As software companies scramble to integrate AI or risk obsolescence, their capital expenditure (CapEx) remains directed toward Nvidia’s H200 and Blackwell chips, with the Rubin transition looming. The current valuation of 16x FY28 EPS suggests that the market has priced in a "worst-case scenario" for AI demand that does not align with the aggressive infrastructure build-outs being reported by hyperscalers. For disciplined investors, the irrationality of the software-led selloff has effectively de-risked one of the most significant growth stories in financial history, turning a moment of market panic into a textbook entry point.
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