The Anthropic AI logo is displayed on a mobile phone with a visual digital background.
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This week, the software industry experienced heightened market anxiety following the launch of new AI tools by the artificial intelligence firm Anthropic. This announcement prompted a sell-off of stocks in the software-as-a-service and data provider sectors.
Designed for its Claude “Cowork” AI agent, Anthropic’s latest tools aim to manage intricate professional tasks often marketed as essential by various software and data providers.
These AI solutions address functions such as legal and technological research, along with customer relationship management and analytics. This has raised concerns that traditional software business models could be threatened by AI innovations.
The S&P 500 Software & Services Index, consisting of 140 different companies, saw a decline of over 4% on Thursday, marking an eight-day drop streak. The index has fallen roughly 20% this year alone.
Notable companies, including Thomson Reuters, Salesforce, and LegalZoom were particularly affected in the U.S. market this week, with the negative trend also impacting Asian IT firms such as Tata Consultancy Services and Infosys.
Despite the growing anxiety in the market, opinions remain divided among analysts and technology executives regarding the long-term implications of these AI advancements for the industry.
‘Illogical’ Panic?
Several technology leaders have sought to downplay the concerns surrounding AI’s potential to disrupt enterprise software. Jensen Huang, CEO of Nvidia.
He stated, “There’s this misconception that the software industry is declining and will be wiped out by AI,” during a recent event. “It is the most irrational assertion imaginable.”
Instead, he argued that AI will complement and enhance current software tools rather than entirely replace them.
Similarly, Rene Haas, CEO of British chip maker Arm Holdings, expressed a similar viewpoint this week. During an earnings call, he mentioned that the deployment of AI in enterprises is still in its nascent stages and has yet to become significantly transformative.
Haas described the prevailing market fears as “micro-hysteria” in a conversation with the Financial Times.
Nonetheless, fears regarding the software sector were already present prior to the recent sell-offs. Hedge funds had shorted approximately $24 billion worth of software stocks this year, as of Wednesday. Short selling involves borrowing shares, selling them, and aiming to repurchase them later at a lower price for profit.
On Thursday, Anthropic also unveiled an upgraded AI model, which came shortly after the release of its latest Claude tools that caused investor apprehension.
Mixed Outlook
While many technology analysts increasingly warn that AI could fundamentally reshape the software industry, opinions about this risk, as well as the recent sell-off in software stocks, remain varied.
A research note released on Wednesday by Wedbush Securities aligned with Jensen Huang’s remarks, suggesting that although AI presents challenges for software providers, the sell-off depicts an “Armageddon scenario for the sector that is far from reality.”
The note argued, “Companies will not completely dismantle billions of dollars of existing software investments to transition to solutions offered by Anthropic, OpenAI, and others.”
According to Wedbush Securities, substantial enterprises have accumulated trillions of data points over decades, which are now deeply embedded in their software frameworks.
Conversely, some analysts believe that the concerns are more serious. The advisory firm Constellation Research stated on Wednesday that the sell-off indicates apprehensions that AI might pressure profit margins and limit pricing power amongst software companies, rather than signaling an impending collapse of the industry.
Rolf Bulk, a tech equities analyst at Futurum Group, told CNBC, “There will likely be a cannibalization of SaaS by AI-driven workflows, which will affect the sector’s valuation metrics.”
That said, Bulk highlighted that specific software providers, particularly those managing mission-critical enterprise operations like Oracle and ServiceNow, maintain a durable “right to earn.” Their extensive data repositories and integral roles in customer processes make them likely to coexist with AI rather than face elimination.
This perspective is actively pursued by other software companies. For instance, AlphaSense, a market data and research firm, incorporates AI tools throughout its offerings. Chris Ackerson, SVP of Product at AlphaSense, stated, “The future belongs to providers that seamlessly blend innovative AI with reliable content, explainability, and in-depth domain knowledge.”
— CNBC’s Matthew Chin contributed to this report
