In a recent earnings call, Google CEO Sundar Pichai expressed his skepticism regarding the market’s reaction to Anthropic’s AI plugins, deeming it excessive. Amid a wave of anxiety in the software sector, he emphasized that AI serves as a tool for enhancement, akin to how it has benefited Google’s various services such as Search and YouTube. Pichai pointed out that businesses willing to embrace this change will discover new opportunities ahead.
This reassurance comes in the wake of a significant downturn in software stocks globally, driven largely by the impact of Anthropic’s Claude Cowork plugins, which reportedly erased approximately $285 billion from the market in a single day. Analysts labeled this event a ‘SaaSpocalypse,’ a term underscoring the chaos surrounding software investments.
Nvidia’s Huang Joins Pichai, Criticizing Market Reaction
Pichai is not alone in his assessment; Nvidia CEO Jensen Huang has also spoken out against the market’s response. Speaking at a recent Cisco event, he referred to the selloff as “the most illogical thing in the world,” asserting that AI will build upon existing software rather than upend it. Huang posed a rhetorical question: “Would you use a screwdriver or create a new one?” He noted that Nvidia has effectively leveraged such AI tools to allow employees to concentrate on designing chips and systems.
Executives from various software companies have echoed these sentiments, asserting that their roles extend beyond mere coding. They provide essential data management services and tailored solutions that are intricate to replicate, particularly for industries outside of technology, like retail and oil and gas.
Unpacking the Cause of the Selloff
The release of 11 open-source plugins for Anthropic’s Claude Cowork, designed for non-technical professionals, was the catalyst for concerns. While most plugins addressed standard business operations—such as sales, marketing, finance, and customer support—the legal plugin generated significant unease. This feature automates tasks like contract reviews and compliance checks.
Morgan Stanley analyst Toni Kaplan categorized this plugin release as a sign of increasing competition that could adversely impact established players in the legal field. The consequences were swift, with shares of Thomson Reuters and RELX dropping roughly 15% each, while LegalZoom declined by nearly 20%. Indian IT stocks also suffered losses, with Infosys ADRs falling 5.5% and Wipro dropping almost 5%.
A Deeper Fear Beyond One Plugin
The apprehension surrounding AI tools extends beyond the legal sector. There is a growing realization that these tools are capable of executing tasks previously thought to require specialized knowledge. With just a few simple commands, AI can manage files, analyze stock data, and even write software. Numerous users have taken to social media to share experiences of creating their first software programs without any prior expertise—one example being Shopify’s CEO, who used AI to develop software that interpreted his recent MRI.
Meta’s CFO Susan Li recently reported a 30% increase in productivity per engineer year-over-year, attributed to AI coding tools, with power users seeing boosts of up to 80%. Furthermore, Claude Code, Anthropic’s product, achieved an impressive $1 billion in annual recurring revenue shortly after launch, and the company is currently seeking to raise $20 billion at a staggering $350 billion valuation. Notably, shifts in enterprise business have seen OpenAI cede some ground to Claude, with businesses now accounting for 80% of Anthropic’s clientele.
Pichai and Huang remain hopeful that the current market panic will dissipate, but the sentiment on Wall Street appears to be more cautious.
