Nvidia boss Jensen Huang says AI-replacement fears tanking software stocks is the 'most illogical thing in the world'

• Software stocks dragged the tech sector lower on Tuesday.
• Nvidia CEO Jensen Huang weighed in, saying fears of AI disruption are "illogical."
• The software-led rout marks a rotation into other parts of the market that have lagged lately.

Tech stocks continued to wobble on Wednesday as Wall Street's worries that AI will replace software, a notion that Nvidia CEO Jensen Huang dismissed as "illogical" this week.

The tech-heavy Nasdaq Composite and the S&P 500 extended losses from Tuesday's session. The software sector led a tech-sell-off with the iShares Expanded Tech-Software Sector ETF down nearly 4%, adding to its year-to-date 22% loss.

But Wall Street's fears about further disruption from AI were brushed aside by one of the icons of the AI space on Tuesday. Nvidia CEO Jensen Huang weighed in on the latest jitters at a Cisco AI event.

"There's this notion that the tool industry is in decline and will be replaced by AI. You could tell because there's a whole bunch of software companies whose stock prices are under a lot of pressure because somehow AI is going to replace them. It is the most illogical thing in the world and time will prove itself."

Huang outlined his view that software is a tool for AI to use, rather than replace, explaining that AI will use the tools software offers rather than reinventing its own.

The CEO named Service Now, SAP, Cadence, and Synopsis, specifically as bright spots in the space.

Recent weakness in the software sector comes amid a broader market rotation away from tech. The iShares Expanded Tech-Software Sector ETF has seen a nearly 20% decline in the past year, and the sector fell into a bear market last week.

Here are some of the stocks dragging the iShares Expanded Tech-Software Sector ETF lower during Wednesday's session:

• Palantir: -7.5%
• Applovin: -16%
• Unity Software: -9%
• Hut 8 Corp.: -11%