A wave of selling gripped global software stocks on Tuesday and Wednesday, triggered by the release of a new artificial intelligence tool from Anthropic PBC. The rout, which saw billions wiped from market capitalization, reflects growing investor anxiety about the potential for AI to disrupt the software industry.
The selloff began after Anthropic launched an AI automation tool designed for in-house legal teams. While the company stresses the need for attorney review of all outputs, the tool’s capabilities – including automating contract reviews and legal briefings – were enough to send shockwaves through the market. Shares of companies reliant on legal software and data analytics were particularly hard hit.
The impact was immediate and widespread. Legalzoom.com Inc. (LZ) experienced a dramatic decline, plummeting 20%. CS Disco Inc. (LAW) fell 12%, while London Stock Exchange Group Plc, with its substantial data analytics business, dropped 13%. Thomson Reuters Corp. (TRI) saw a 16% decrease in its share price. RELX Plc and Wolters Kluwer NV each fell more than 10%, and Experian Plc dropped 9%.
The decline wasn’t limited to companies directly serving the legal sector. The iShares Expanded Tech-Software Sector ETF fell as much as 4.4%, and a UBS Group AG basket of European stocks considered vulnerable to AI disruption sank nearly 7%. Indian IT exporters also felt the pressure, with shares slumping 6% on , tracking losses in global software stocks.
The current market turbulence builds on existing concerns. The S&P North American software index had already been on a three-week losing streak, culminating in a 15% drop in January – its largest monthly decline since October 2008. The January release of Anthropic’s Claude Cowork tool had already begun to amplify fears of disruption, and the new legal AI offering intensified those anxieties.
“We call it the ‘SaaSpocalypse,’ an apocalypse for software-as-a-service stocks,” said Jeffrey Favuzza of Jefferies, describing the prevailing sentiment on Wall Street. He noted that trading had become “get me out’ style selling,” with investors prioritizing exit over price.
The total value erased from the market as a result of these concerns is substantial. The initial impact of Anthropic’s legal AI tool launch led to a $285 billion rout across the software, financial services, and asset management sectors. A broader assessment indicates the total market impact has exceeded $300 billion.
Analysts at Morgan Stanley echoed the concerns about increased competition. They noted that Anthropic’s new capabilities for its Cowork platform in the legal space “heighten competition within the space,” viewing it as “a sign of intensifying competition, and thus a potential negative.”
The selloff extends beyond software. Companies that sell or invest in software, including Expedia, Ares, and Apollo, also experienced sharp declines on . This suggests that the market’s concerns are not limited to the software industry itself, but also encompass the broader financial implications of AI-driven disruption.
The market reaction highlights a growing sense of uncertainty about the future of the software industry. As one trader reportedly told Bloomberg, the question is now “what’s your hold-your-nose level?” – a reflection of the difficulty in identifying a bottom to the current decline. The lack of conviction among investors suggests that the selling pressure may continue until there is greater clarity about the long-term impact of AI on the software landscape.
