Nvidia CEO Jensen Huang Has Good News for Investors. Here Are 5 AI Stocks to Buy Now.

The S&P North American Technology Software Index has fallen about 30% from its high, placing the 111-stock index in bear-market territory amid concerns that AI tools (cited catalyst: Anthropic's Cowork) could disrupt software incumbents. Nvidia CEO Jensen Huang called the selloff “illogical,” and the piece highlights five beaten-down names that may be attractive: Microsoft (down 27%, ~26x earnings, adjusted EPS +24% last quarter), Datadog (down 47%, ~53x adjusted earnings, adjusted EPS +20%), AppLovin (down 52%, ~45x earnings, EPS +96%), Atlassian (down 70%, ~22x earnings, adjusted EPS +27%), and HubSpot (down 73%, ~25x earnings, adjusted EPS +22%). The article frames the weakness as sentiment-driven and suggests patient investors could benefit by buying quality software earnings growth at reduced multiples.

Analysis

Market structure: AI is reallocating economic profit toward compute and data moats (NVDA, cloud infra providers) while creating optionality for incumbents (MSFT, TEAM, HUBS) to embed AI into seat-based products. Winners: Nvidia and cloud infra (higher gross margins, constrained supply → pricing power); Monitoring/observability (DDOG) benefits as models need SRE tooling. Losers: smaller, low-data SaaS and ad platforms without unique datasets (higher churn/price pressure).

Risk assessment: Tail risks include acute regulation (US/EU AI controls), open-source LLM breakthroughs that commoditize inference, and GPU supply-chain shocks; any one could trigger >30% downside for infrastructure names. Timing: immediate (days–weeks) = volatility and multiple compression; short-term (quarters) = guidance and adoption metrics; long-term (2–5 years) = TAM expansion for infra, potential margin reallocation. Hidden deps: heavy reliance on third‑party LLMs/cloud capacity and dataset exclusivity.

Trade implications: Tactical longs on NVDA and select incumbents warranted but size conservatively (1–4% each) and use hedges; prefer long MSFT and TEAM/HUBS over pure-play small-cap AI hopefuls. Options: buy 3–6 month put spreads on software ETF (IGV) to cap sector tail risk; sell covered calls on established cash‑flowing names to monetize volatility. Catalysts to watch: NVDA datacenter guidance, MSFT copilot DAU/paid seat cadence, Anthropic/OpenAI enterprise deals.

Contrarian angles: The market appears to have over-discounted augments-as-replacements—stocks down 25–70% (MSFT 27%, TEAM 70%, HUBS 73% from highs) imply permanent loss of demand that is unlikely. Historical parallel: cloud/ mobile transition where incumbents that embedded new tech re‑rated; expect consolidation and M&A among beaten-down software, creating event-driven upside. Unintended consequence: concentration into NVDA may spur regulatory scrutiny and secondary supply constraints that create trading opportunities.

Key Decisions for Investors

• Establish a 2.0–3.0% long position in NVDA on a 10–20% pullback from current levels (or immediately at reduced size), target 30–60% upside over 12–24 months; add if datacenter revenue guidance beats by >5% QoQ.
• Initiate a 2.5% long position in MSFT, horizon 6–12 months; reduce by half if paid copilot seat growth decelerates to <50% QoQ or if adjusted EPS guidance misses by >5%.
• Build a 1.5–2.0% combined long position split equally between TEAM and HUBS (0.75–1.0% each), target ~40% upside over 12–24 months; implement a 30% stop-loss to limit execution risk.
• Hedge sector risk by buying 3–6 month put spreads on the software ETF IGV (protecting ~2% of portfolio) with strikes ~10–15% below current levels; alternatively short 0.5–1.0% IGV on strength to capture continued multiple compression.
• If meaningful AI regulation is enacted in US/EU within 12 months, reduce NVDA/MSFT exposure by 50% and rotate proceeds into cash-flow-positive enterprise software (MSFT, TEAM) and event-driven M&A names in the beaten-down small-cap software cohort.