European and U.S. software stocks “struggled to find support on Wednesday as a sector-wide selloff spread to Asia,” according to the report, “fuelled by mounting worries that advances in artificial intelligence could upend companies' business models.” Analysts said the declines reflected fears over rapid AI developments disrupting traditional software and IT services.
“European data analytics, professional services and software stocks fell for a second day in volatile trade, mirroring losses in global peers after Anthropic's new legal AI tool underscored the threat to businesses seen as most exposed to AI disruption.”
Even as Nvidia CEO Jensen Huang “played down fears AI would replace software and related tools, calling the idea 'illogical' and saying 'time will prove itself,'” the market reaction remained cautious.
Investor Caution and Portfolio Protection
Some analysts argued the sell-off represented “a scramble to shield portfolios from AI disruption as the rapid advances in the technology muddy valuations and cloud business prospects beyond the standard three-to-five year forecasts of companies.”
Software is particularly vulnerable as AI tools like Claude “increasingly automate the routine tasks that have long underpinned the industry's pricing power.” J.P. Morgan analyst Toby Ogg said, “We are now in an environment where the sector isn't just guilty until proven innocent but is now being sentenced before trial.”
He added, “Our sense from investor discussions is that general appetite to step in remains generally low,” citing competition from AI-native firms and clients developing in-house solutions.
Major Stocks Face Pressure
Britain’s RELX and the Netherlands’ Wolters Kluwer “dropped about 3% in morning trade before paring some losses, after plunging more than 14% and 12%, respectively, on Tuesday.”
Shares of U.S. software and services firms “were mixed in premarket trading after a near 13% slide over five straight sessions.” Nasdaq-listed Thomson Reuters, the parent company of Reuters News, “was flat in light volume after Tuesday's record 16% slump on fears that AI could threaten its core legal division.” London Stock Exchange Group “slid as much as 6.9%, extending Tuesday's near 13% drop.”
Asian markets also felt the impact. Indian IT exporters “fell sharply, while Japanese software and systems developers NEC, Nomura Research, and Fujitsu sank between 8% and 11%, dragging the Nikkei benchmark index lower overnight.”
Anthropic Sparks Market Concern
“One trigger for Tuesday's selloff was Anthropic's launch of plug-ins for its Claude Cowork agent on Friday, enabling automated tasks across legal, sales, marketing and data analysis.”
Advertising stocks, considered among the most exposed in European media to AI, “also stayed under pressure.” France's Publicis “was last down 3.6% and Britain's WPP lost 3%, both hitting new lows.”
SAP, Europe’s largest software company, “dropped more than 3%, a week after a disappointing cloud revenue forecast wiped around $40 billion off its market value.”
Warnings Amid AI Boom
Despite gains for Nvidia and AI hyperscalers like Microsoft pushing U.S. stocks to record highs, regulators and policymakers—including the International Monetary Fund and the Bank of England—“have warned of the risks of a potential bubble.”
Ben Barringer, head of technology research at Quilter Cheviot, said, “All innovation means there is going to be disruption at some point, and we appear to be at a significant point in that journey for software and IT services companies. There is a lot of uncertainty around exactly what AI agents can do, and as such, investors are choosing to shun the software market altogether, leaving nowhere to hide.”
In U.S. premarket trading, Salesforce, CrowdStrike, and Adobe “each dipped about 0.2%, while Intuit eased 0.6%.” Atlassian Corp “firmed 0.6%.
