By Brian Sozzi

Far be it from me to offer up a differing perspective than the almighty AI chip god more formally known as Nvidia (NVDA) founder and CEO Jensen Huang.

But this one time as it pertains to the AI stock rout we are witnessing, I must "push back" on the often leather jacket clad Big J.

"There's this notion that the tool in the software industry is in decline, and will be replaced by AI ... It ​is the most illogical thing in the world, and time will ‌prove itself," Huang reportedly said at an AI event that router giant Cisco (CSCO) held on Tuesday. "If you were a human or robot, artificial, general robotics, would you use tools or reinvent tools? The answer, obviously, is to use tools ... That's why the latest breakthroughs in AI are about tool use, because the tools are designed to be explicit."

At this crucial moment for tech investors, the market can care less what Jensen has to say on this topic. Sure, Jensen is often the one that stirs the drink in markets in part because Nvidia is the one that stirs the drink in markets.

But the market fully believes software companies such as Salesforce (CRM), Workday (WDAY), Thomson Reuters (TRI), SAP (SAP), and ServiceNow (NOW) have their terminal values at risk because of quick-developing advancements of AI.

Just look at what Anthropic (ANTH.PVT) debuted on Friday (which initially flew a little under the radar), which sparked another software rout on top of the rout we had already seen in 2026.

The AI developer debuted plug-ins for its Claude Cowork agent that could automate tasks across legal, sales, marketing and data analysis.

By the close of trading on Tuesday, shares of Thomson Reuters, Legalzoom.com (LZ), PayPal (PYPL), Expedia Group (EXPE), Equifax (EFX), and Intuit (INTU) had all crashed by double-digit percentages. There is minimal nibbling at these names today on the deep pullback.

The overall US Software index fell nearly 5%, and saw 104 decliners and only 9 risers. The drop marked its sixth successive decline to put the index back to April levels.

"While the question over the end-winners from AI is unlikely to be answered in 2026, recent months have seen a clear shift in markets from AI euphoria towards more differentiation between companies, and growing concern about its disruption to existing business models," Deutsche Bank strategist Jim Reid said in a note.

What, you think other model builders aren't working on similar functionality to Anthropic's? You think Anthropic and the brother/sister leadership combo of Dario and Daniela Amodei won't lean into more of these AI tools to try and render software companies obsolete? Their only goal is to drive value higher for Anthropic investors! They could care less about the feelings of Marc Benioff at Salesforce (who has seen his stock plunge 42% in the past year because of these AI fears).

Of course the model builders are going to push hard. And the thing is, bloated legacy software companies can't move as fast as the upstart model builders.

The reality is the reality check in software stocks will continue, until the market decides it has fully captured a risk to their terminal values.

"Software is contending with a steadily more bearish narrative, amplified by each new AI release that investors perceive as disrupting software. The common thread across nearly every software downturn is that the sector tends to outperform the S&P once it finds a bottom. The harder question is how much pain remains before getting there, but there are no ‘silver bullets’ in terms of shifting sentiment," Evercore's Kirk Materne said.

Now Kirk is someone I can agree with today!

Brian Sozzi is Yahoo Finance's Executive Editor and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.