Software stocks tumble on AI disruption fears
Analysts predict more volatility in the future
By: Danilo Masoni
Reuters
..... Software stocks extended their slide during morning trades on February 4, [2026] driven by fear of disruption caused by artificial intelligence, with some analysts warning of more volatility as investors assess whether the challenge is existential for the sector.
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The selloff was triggered by a news legal tool form Anthropic, which showed the AI industry's growing push into industries that can unlock lucrative enterprise revenue needed to fund massive investments in the technology.
..... That push has sparked fears f disruption in industries ranging from finances to law and coding.
..... Grappling with slower progress in the development of the AI models that power their technology startups such as OpenAI and anthropic are under pressure to justify their valuations.
..... Their straggly is reminiscent of how Amazon disrupted several industries by first winning an niche Online book market and then suing that foothold to build a business that now spans retail, cooed and logistics.
..... Some analysts said the success of AI startups was, however, far from guaranteed, given that they lack the specialized data hat is crucial to businesses in the industries.
..... The S&P 500 software and services index slid nearly 13% over five straight sessions and is down 26% form its October [2025 peak, whereas the S&P too recently scaled an all-time high.
..... "We are not yet at the point where AI agents will destroy software companies, especially given concerns around security, data ownership and use," said Ben Barringer, head of technology research at Quilter Cheviot.
..... "During times of volatility, people often shoot first and ask questions later. As a result, this is not necessarily an isolated incident and further volatility is likely to come."
..... The impact was felt not just across technology companies but also private credit firms that lend heavily to software firms. Blue Owl Capital tumbled 9.8% on February 3, [2026] while Ares Management dropped 10.2% and KKR fell 9.7%.
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European data analytics, professional services and software stocks fell for a second day in volatile trade, while Britain's RELX and the Netherlands Wolters Kluwer - major providers of analytics to the legal industry - dropped about 4% and 1.8% respectively.
..... London Stock Exchange Group slid as much as 6.9%, extending the near 13% drop on February 3. [2026]
..... Indian IT exporters also fell sharply, while Japanese software and systems developers NEC, Normura Research and Fujitsuy sank between 8% and 11%, dragging the Kikkel benchmark index lower overnight.
..... The declines came 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."
..... Some analysts said the sell-off reflected a scramble to shielded portfolios from AI disruption as the rapid advance in the technology muddy valuations and cloud business prospects beyond the standard three-to-five year forecasts of companies.
..... Software is seen as especially vulnerable to disruption as tools such as Claude increasingly automate the routine task hat have long underpinned the industry's pricing power.
..... One trigger fir the February 3 [2026] selloff was Anthroptic's launch of plug-ins for its Claude Cowork agent on January 30, [2026] enabling automated tasks across legal, sales, marketing and data analysis.
..... With stellar gains in chipmaker Nvidia and so-called AI hyper-scalers like Microsoft pushing stocks to record highs, regulators and policymakers have warned of the risks of a potential bubble.