Investors reprice disruption risk across the sector
U.S. software stocks declined again on Wednesday as investors reassessed whether rapid advances in artificial intelligence could erode the foundations of the enterprise software industry. The selling pressure reflected growing unease that automation-driven tools may undermine business models built on recurring subscriptions and long-term contracts.
The weakness stood in contrast to the broader equity market. While the S&P 500 reached a new record earlier in the week, the S&P 500 software and services index has fallen nearly 13% over five consecutive sessions and now trades about 26% below its October high.
Anthropic launch sharpens focus on enterprise exposure
The latest wave of selling followed the rollout of new AI tools from Anthropic, highlighting how leading AI developers are accelerating their push into enterprise workflows. The move has raised concern that AI firms are no longer focused solely on model development, but are increasingly targeting high-value industries such as law, finance, sales, and data analysis.
A key catalyst was Anthropic’s launch of plug-ins for its Claude Cowork agent on Friday. The tools allow automated handling of tasks traditionally performed by professional software or service platforms, reinforcing fears that AI providers are positioning themselves as direct competitors rather than complementary technologies.
Some analysts cautioned against extrapolating too much too quickly. Mark Murphy, Head of U.S. Enterprise Software Research at J.P. Morgan, said it was an “illogical leap” to assume that productivity tools would result in companies replacing entire layers of mission-critical enterprise software.
Volatility spreads beyond software equities
Market participants said the selloff reflects an attempt to reduce exposure to uncertain long-term outcomes as AI adoption complicates standard valuation models. Rapid technological change has made it more difficult to forecast earnings and competitive dynamics over the usual three-to-five year horizon.
Ben Barringer, head of technology research at Quilter Cheviot, said the market is not yet at a point where AI agents would dismantle software companies, citing constraints related to security, data ownership, and data usage. He added that heightened volatility often leads investors to cut risk before clarity emerges, increasing the likelihood of further sharp moves.
The impact extended into private credit firms with heavy exposure to software borrowers. Blue Owl Capital fell 9.8% on Tuesday, while Ares Management dropped 10.2% and KKR declined 9.7%.
Global tech and data providers under pressure
Information services and software providers also sold off. Nasdaq-listed Thomson Reuters declined about 2% after a record 16% drop in the prior session, amid concerns that AI could challenge its core legal business. Salesforce, CrowdStrike, Adobe, and Intuit fell between 2% and 6.6%.
In Europe, data analytics and professional services stocks fell for a second straight day in volatile trade. Britain’s RELX dropped about 4%, while the Netherlands’ Wolters Kluwer fell roughly 1.8%. London Stock Exchange Group slid as much as 6.9%, extending the previous session’s near 13% decline. Shares in SAP, Europe’s largest software company, fell nearly 4%.
Weakness also spread across Asia. Indian IT exporters declined sharply, while Japanese software and systems developers NEC, Nomura Research, and Fujitsu fell between 8% and 11%, weighing on the Nikkei index.
Debate intensifies over long-term impact of AI
The declines came despite attempts to calm market fears from industry leaders. Nvidia CEO Jensen Huang dismissed the idea that AI would replace software outright, calling the premise illogical and saying that “time will prove itself.”
Even as AI-linked gains in Nvidia and major cloud and infrastructure providers such as Microsoft have helped push U.S. equities to record levels, regulators and policymakers including the International Monetary Fund and the Bank of England have warned of the risks associated with excessive concentration and valuation compression linked to AI enthusiasm.
