Software stocks in Europe and the US found little support on Wednesday, as a broad sell-off spread to Asian markets, fueled by escalating concerns that the rapid advancement of artificial intelligence technology could disrupt established business models. Following Anthropic's launch of a new compliant AI model, which highlighted the threat of AI disruption to highly exposed companies, European stocks in data analytics, professional services, and software fell for a second consecutive day in volatile trading, echoing declines seen among their global peers. UK's RELX Group and the Netherlands' Wolters Kluwer—two major data analytics providers for the legal industry—saw their shares drop by approximately 3% during early trading before partially recovering; both stocks had already plummeted over 14% and 12% respectively on Tuesday. US software and services companies showed mixed results in pre-market trading, following a five-day losing streak that had dragged the sector down nearly 13%. Nasdaq-listed Thomson Reuters, the parent company of Reuters, saw its shares hold steady on low volume; the stock had suffered a record 16% plunge on Tuesday due to market fears that AI could impact its core legal business. Shares of the London Stock Exchange Group fell as much as 6.9%, extending Tuesday's nearly 13% decline. Indian IT outsourcing firms also experienced significant sell-offs; Japanese software and systems developers NEC, Nomura Research Institute, and Fujitsu saw their shares drop between 8% and 11%, contributing to a lower Nikkei benchmark index overnight. This sector-wide downturn stems from widespread anxiety about a potential tech bubble burst and the subsequent risks to financial stability. Toby Ogg, an analyst at JPMorgan, stated that investors are currently focused on long-term growth issues, with their considerations extending far beyond the traditional three-year earnings forecast horizon. He noted, "The sector is now not just 'guilty until proven innocent,' but is being judged before even facing a trial." He added that, based on communications with investors, overall market appetite for entering the sector remains weak, citing risks such as competition from native AI companies and a trend of clients building their own internal solutions. The Sell-Off Trigger: Anthropic's New Move One of the triggers for Tuesday's sell-off was Anthropic's introduction last Friday of plugin capabilities for its Claude Cowork agent, which can automate tasks in legal, sales, marketing, and data analysis fields. Advertising stocks, viewed as a European media sector with high exposure to AI, also remained under pressure. France's Publicis Groupe fell a further 3.6%, while UK's WPP dropped 3%, with both stocks hitting new all-time lows. SAP, Europe's largest software company, saw its shares decline over 3%; a week earlier, the company's disappointing cloud revenue outlook had wiped approximately $40 billion from its market value. While chip giant Nvidia and AI hyperscalers like Microsoft saw significant gains, pushing US stock markets to record highs, regulators and policymakers including the International Monetary Fund and the Bank of England have been warning about potential bubble risks. Ben Barringer, Technology Research Lead at Quilter Cheviot, commented, "All innovation eventually causes disruption at some point, and software and IT services firms currently appear to be at a critical juncture in this process." "There is still immense uncertainty regarding the actual capabilities of AI agents, which is precisely why investors are choosing to avoid the software market altogether, leaving related stocks with nowhere to hide." In US pre-market trading, Salesforce, CloudStrike, and Adobe each fell about 0.2%, Intuit dropped 0.6%, while Atlassian gained 0.6%.
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