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

The Tong Finance APP learned that in February, investors withdrew from technology stocks, and concerns that artificial intelligence (AI) could disrupt traditional industries triggered market volatility. The Nasdaq Composite Index fell more than 4% over the past month.

However, Wall Street strategists believe that 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). The earnings reports of these two companies 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 trend has been sideways this year, making it a good buying opportunity.

She pointed out that considering Microsoft (MSFT.US), Meta (META.US), Amazon (AMZN.US), and Google (GOOGL.US), which 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.

“We’re getting signals from all supercomputing vendors that demand for computing power exceeds supply, and this 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 plainly. “There are better options in the market.”

In fact, many investors have recently begun to question whether customers of Software as a Service (SaaS) companies will turn to self-developed solutions like Anthropic’s Claude Code and other large AI models, thereby reducing dependence on service providers like Salesforce.

More importantly, 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 choosing to position ourselves in 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 in the coming years the number of software seats ultimately decreases, that is indeed concerning.”

She believes that more attractive opportunities currently exist in the storage chip sector—an essential component for 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.”

Memory 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 contrast, the Technology Software Sector ETF iShares (IGV.US) has fallen 24% since January.

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

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

Goldman Sachs analyst Ryan Hammond and his team said, “We expect that investors will either need several quarters of evidence proving these companies’ resilience or a significant decline in their valuations relative to other market sectors before they will re-enter these stocks in large numbers.”