Thursday might be significant for investors, potentially in several ways.
Over the past three years, the stock market has seen quite a shift. The broad-based S&P 500 has risen by 73%, while the tech-heavy Nasdaq Composite has surged 99% (as of now). This growth far surpasses the average annual stock return of around 10%. Many experts attribute this impressive rise to the influence of artificial intelligence (AI).
However, numerous software-as-a-service (SaaS) stocks have experienced steep declines lately. New AI tools have raised worries about them potentially replacing existing software in accounting, legal, and sales sectors, prompting some investors to sell off their holdings.
Looking ahead to Thursday, the stock market could make some significant moves, with two crucial financial reports set to drop after the market closes on Wednesday. These reports should shed light on both the state of the market and the repercussions of the ongoing AI revolution.
Is there still a demand for GPUs?
Nvidia (NVDA +0.94%) has emerged as a major winner in the AI surge, with its stock skyrocketing 1,200% since the start of 2023. The company’s graphics processing units (GPUs) are now considered top-tier for running AI models, contributing significantly to record levels of revenue and profit. Investors are particularly attentive to Nvidia’s fiscal 2026 fourth-quarter results (ending January 26), given its leadership in the AI domain.
The recent third-quarter results were impressive: revenue hit $57 billion, a 62% year-over-year increase, along with a 67% rise in diluted earnings per share (EPS) to $1.30. CEO Jensen Huang mentioned that sales of Nvidia’s Blackwell chips are “by an order of magnitude,” and that cloud GPUs are currently sold out.
Looking ahead, management predicts growth will continue into the fourth quarter, forecasting a revenue increase of 65% to $65 billion and an adjusted EPS up 63% to $1.45. Wall Street also shares this optimistic outlook, with analysts estimating revenue of $65.7 billion and an adjusted EPS of $1.53.
Investors will be monitoring whether Nvidia meets or beats its own guidance along with Wall Street’s projections. I think it might also be crucial to pay attention to management’s insights on ongoing demand for AI-related processors.
Given that Nvidia constitutes roughly 7.4% of the S&P 500, its performance can substantially sway the index. Thus, its report could lead to significant gains or losses on Thursday.
Is the demand for SaaS stocks diminishing?
Recent advancements from the AI startup Anthropic seem to have intensified worries in the software stock sector. Investors fear that the new updates to the company’s productivity tools might lessen the demand for its flagship SaaS products, potentially leading to a “SaaSpocalyse.”
Salesforce (CRM 0.04%) is recognized as a SaaS trailblazer and a leading cloud-based customer relationship management platform. Concerns about its product outlook have impacted its stock, which has dropped 30% since early 2026. Investors will keep a watchful eye on its performance, especially given the implications of weakening demand.
Salesforce’s fiscal third-quarter results for 2026 (ending October 31) showed revenues of $10.3 billion, a 9% annual increase, while EPS amounted to $2.20, up 38%. A key indicator—the company’s remaining performance obligations (RPO)—also grew 12% to $59.5 billion. If this RPO grows quicker than revenue, it may signal solid demand and bode well for the future.
Salesforce anticipates fourth-quarter revenue to reach approximately $11.2 billion, reflecting 11% growth. However, EPS is expected to decline 15% as the company invests heavily in AI-related projects. It also projects a 15% increase in current RPO.
Even though Salesforce only represents about 0.28% of the S&P 500, its results could significantly inform perspectives on overall SaaS demand, potentially influencing market reactions on Thursday.
Investors are paying attention
Both Nvidia and Salesforce are set to release their financial reports after the market closes on Wednesday. Nvidia’s insights will be critical for gauging ongoing demand for AI chip technology. Likewise, Salesforce’s earnings and management commentary could reveal much about future demand for SaaS stocks.
Nonetheless, some argue that fears around the demise of SaaS stocks might be overstated. When asked about AI-induced disruption in the software realm, Huang suggested the current anxiety could be excessive. “The thought is that the software industry is waning and will be supplanted by AI,” he mentioned. Instead of seeing AI as a complete replacement, he posed, “Do you use a hammer or invent a new one?” He remarked on the irrationality behind the notion that many software stocks are on the verge of replacement by AI.
We’ll have a clearer understanding on Thursday.
