The AI sell-off wave hasn't subsided; which tech stocks can break through? Wall Street strategists provide the answer.

In February, investors withdrew from tech stocks, and concerns that artificial intelligence (AI) could disrupt traditional industries triggered market volatility, with the Nasdaq Composite Index falling over 4% in the past month.

However, Wall Street strategists believe there will be significant differentiation within the tech sector in the short term.

“We hold Nvidia (NVDA.US) and do not hold Salesforce (CRM.US), and their earnings reports show a stark contrast,” said Nancy Tengler, CEO of Laffer Tengler Investments.

Tengler believes that after Nvidia released its quarterly earnings last Wednesday, its stock price retreated about 5%, and its sideways movement this year presents a buying opportunity.

She pointed out that considering large-scale companies like Microsoft (MSFT.US), Meta (META.US), Amazon (AMZN.US), and Google (GOOGL.US) are expected to invest around $650 billion this year to build AI data centers powered by Nvidia chips, Nvidia’s current valuation still appears cheap.

“All signals from supercomputing vendors indicate that demand for computing power exceeds supply, which is the source of revenue growth,” Tengler explained. “One company’s capital expenditure is another company’s revenue—Nvidia is precisely the latter.”

In contrast, Tengler revealed that her firm once held Salesforce shares but has long since sold them. “We don’t see a growth trajectory,” she said frankly. “The market has better options.”

In fact, many investors have recently begun to question whether customers of Software as a Service (SaaS) companies will turn to large model AI tools like Anthropic’s Claude Code for in-house solutions, thereby reducing reliance on service providers like Salesforce.

More critically, if AI enhances productivity and reduces employment levels, it will directly impact the traditional “per-seat” pricing model in the software industry.

“Per-seat software sales are essentially tied to the employment market,” Tengler analyzed. “Therefore, we are diversifying into other areas.” Goldman Sachs economists forecast that the unemployment rate will rise from 4.3% to 4.5% this year, noting that the risk of job displacement due to AI’s rapid adoption is increasing.

Melissa Otto, head of research at S&P Global Visible Alpha, said, “If the number of software seats ultimately decreases in the coming years, that is indeed concerning.”

She believes that more attractive opportunities currently exist in the storage chip sector—an essential component of AI workloads, with prices continuing to soar due to supply bottlenecks.

“Storage stocks are performing remarkably well,” Otto pointed out. “Valuations are lower, but earnings expectations have been significantly revised upward, reminiscent of Nvidia two years ago.”

Storage giants Micron Technology (MU.US), Western Digital (WDC.US), South Korea’s SK Hynix, and Samsung (SSNLF.US) have gained a total of 60% this year. In comparison, the Technology Select Sector SPDR ETF (IGV.US) has fallen 24% since January.

Overall, although strategists believe last month’s sell-off may have been excessive, most are reluctant to declare that the market has bottomed.

Goldman Sachs analysts recently noted that, in the short term, it is difficult to disprove concerns that AI will impact data-intensive industries such as software, media, education, and business services.

Ryan Hammond and his team at Goldman Sachs stated, “We expect investors will either need several quarters of evidence demonstrating resilience in these companies’ businesses or a significant decline in their valuations relative to other market sectors before re-entering these stocks in large numbers.”