These pressures have led to fears of disruption in sectors ranging from finance to law and coding.Startups like OpenAI and Anthropic are struggling with slower progress in developing the AI models that power their technology and are under pressure to justify their high valuations.
Their strategy is reminiscent of the way Amazon disrupted several industries by first capturing a niche market for online books and then using that position to build a business that now spans retail, cloud and logistics.
However, some analysts said the success of AI startups was far from guaranteed as they lack the specialized data crucial to companies in the industries.
“It feels like an illogical leap to extrapolate Claude Cowork Plugins, or similar personal productivity tools, to expect that every company will write and maintain a custom product to replace every layer of mission-critical enterprise software they’ve ever deployed,” said Mark Murphy, head of US Enterprise Software Research at JP Morgan. The S&P 500 software and services index has fallen nearly 13% in five straight sessions and is down 26% from its October peak, while the S&P 500 hit a record high just this week.
“We are not yet at the point where AI agents will destroy software companies, especially given the concerns around security, ownership and use of data,” said Ben Barringer, head of technology research at Quilter Cheviot.
“During times of volatility, people often shoot first and ask questions later. As a result, this is not necessarily an isolated incident and it is likely that more volatility will come.”
The impact was felt not only by technology companies, but also by private credit companies that lend a lot of money to software companies. Blue Owl Capital fell 9.8% on Tuesday, while Ares Management fell 10.2% and KKR fell 9.7%.
Nasdaq-listed Thomson Reuters, parent company of Reuters News, fell about 2% after Tuesday’s record 16% plunge on fears that AI could threaten its core legal department.
Salesforce, CrowdStrike, Adobe and Intuit fell between 2% and 6.6%.
European data analytics, professional services and software stocks fell for a second day in volatile trading, while Britain’s RELX and the Netherlands’ Wolters Kluwer – major providers of analytics for the legal sector – fell about 4% and 1.8% respectively.
The London Stock Exchange Group fell as much as 6.9%, extending Tuesday’s nearly 13% decline.
Indian IT exporters also fell sharply, while Japanese software and systems developers NEC, Nomura Research and Fujitsu fell between 8% and 11%, pushing the Nikkei benchmark index lower overnight.
TIME WILL PROVE ITSELF
The declines came even as Nvidia CEO Jensen Huang downplayed fears that AI would replace software and related tools, calling the idea “illogical” and saying “time will prove itself.”
Some analysts said the sell-off reflected a struggle to protect portfolios from AI disruption, as rapid advances in technology clouded valuations and prospects for cloud businesses beyond companies’ standard three- to five-year forecasts.
Software is seen as particularly vulnerable to disruption as tools like Claude increasingly automate the routine tasks that have long underpinned the industry’s pricing power.
“We are now in an environment where the industry is not only guilty until proven guilty, but now convicted before trial,” said JP Morgan analyst Toby Ogg.
“Our sense from discussions with investors is that overall appetite for entry remains low overall,” he added, citing risks such as competition from AI-native companies and customers building their own solutions in-house.
ANTHROPIAN THE SPARK BEHIND THE SALE
One trigger for Tuesday’s sell-off was Anthropic’s launch of plugins on Friday for its Claude Cowork agent, enabling automated tasks in legal, sales, marketing and data analytics.
Advertising stocks – seen in European media as among the most exposed to AI – also remained under pressure. France’s Publicis last fell 4.1% and Britain’s WPP lost 3.3%, both hitting new lows.
Shares in SAP, Europe’s largest software company, fell by almost 4%.
With chipmaker Nvidia posting huge profits and so-called AI hyperscalers like Microsoft pushing US stocks to record highs, regulators and policy makers – including the International Monetary Fund and the Bank of England – have warned of the risks of a potential bubble.
#software #stocks #hit #anthropic #wakeup #call #disruption