The S&P 500 software and services index fell 1.8% after losing more than $800 billion in market value over the past six sessions.The performance of foreign technology stocks was mixed. Shares of the London Stock Exchange Group rose 6.1%, while data analytics firm RELX rose 2.8% and Netherlands-based Wolters Kluwer gained 2%.
In contrast, India’s software exporter index, which includes names such as HCL Technologies and Wipro, fell 0.7%, a day after falling 6% in its worst session in almost six years.
Canada-based Thomson Reuters, which suffered a record one-day decline earlier this week after investors raised concerns that a new plug-in from Anthropic’s Claude could disrupt its legal business, fell 2.5% after reporting fourth-quarter results largely in line with estimates.
The company, which owns legal database Westlaw and news agency Reuters, said it was seeing tangible benefits from AI investments. The market is wondering whether the “profit-making nature of software companies would be disrupted,” said Manish Kabra, London-based leading U.S. equity and multi-asset strategist at Societe Generale.
“Right now we haven’t recommended that people buy software for that reason. I think a lot of cyclical sectors will do better.”
The software sell-off has been accompanied by a broader rotation from technology into value-oriented sectors such as consumer staples, energy and industrials, which lagged the bull market that began in October 2022.
Reflecting the bearish mood, short interest in mid-to-large software companies has increased over the past three months, according to data analytics firm Ortex, with cybersecurity and SaaS (Software as a Service) companies seeing the biggest jump in this interest. Alphabet fell 2.8% after its Google parent said its capital expenditures could nearly double this year, raising concerns about returns on its massive AI investments.
Market volatility has spiked in stocks, commodities and digital assets in recent weeks, which market participants attribute to leveraged investors rapidly unwinding their positions.
Precious metals gold and silver resumed their decline on Thursday after a historic rout earlier this week, and bitcoin fell below $70,000 for the first time.
“These are a lot of relative bets going wrong, and then there’s some kind of reset going on in the internal market, but time will tell,” John Hardy, Saxo’s Global Head of Macro Strategy, said in a podcast.
“There’s a lot of leverage in this market. We’ve achieved record leverage in margin lending, etc., so forewarned is forewarned.”
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