U.S. software shares fell further on Wednesday as investors reacted to signs that artificial intelligence is moving more aggressively into enterprise functions that generate lucrative revenue streams. The immediate selloff followed the rollout of a new legal and productivity capability from Anthropic, a development that many market participants said sharpened concerns about the potential reach of AI into areas such as finance, law and software development.
Startups at the vanguard of the recent AI surge, including OpenAI and Anthropic, are facing pressure to justify lofty valuations amid slower-than-expected progress in scaling the underlying models that power their services. Their approach - pursuing early footholds in specific use cases and then broadening into wider enterprise applications - drew comparisons in investor conversations to past technology-driven market expansions, as companies seek paths to the substantial enterprise revenue needed to support continued investment in AI.
Despite this aggressive push, some analysts cautioned that widespread displacement of incumbent enterprise software is not an assured outcome. Mark Murphy, Head of U.S. Enterprise Software Research at J.P. Morgan, said it was an "illogical leap" to assume that plugins or personal productivity tools would automatically translate into every company replacing established, mission-critical software layers with bespoke AI-built products. His remarks underline a prevailing view among some strategists that the presence of new AI features does not equate to immediate, wholesale substitution of entrenched systems.
Market moves reflected a broad reassessment of risk. The S&P 500 software and services index recorded a near 13% decline over five consecutive sessions and is down 26% from its October high, even as the broader S&P 500 hit an all-time peak earlier in the week. The selloff has not been confined to pure software names - lenders that supply credit to technology firms also saw sharp falls, illustrating the interconnectedness of financing and software valuations.
Among financial firms exposed to software lending, Blue Owl Capital plunged 9.8% on Tuesday, Ares Management tumbled 10.2% and KKR fell 9.7%. Thomson Reuters, listed on Nasdaq and the parent of a major news organization, fell roughly 2% following a 16% single-day drop the previous session driven by investor anxiety over AI risks to its legal business.
Large enterprise software and cybersecurity companies were not immune. Shares of Salesforce, CrowdStrike, Adobe and Intuit all declined, with losses ranging from about 2% to 6.6%. In Europe, data analytics, professional services and software groups slipped for a second day amid volatile trading. RELX, a significant legal analytics provider, dropped approximately 4%, while Wolters Kluwer eased by about 1.8%.
London Stock Exchange Group shares fell as much as 6.9%, extending a steep near-13% fall from the prior session. SAP, Europe’s largest software company, saw its shares decline nearly 4%. Indian IT exporters similarly recorded sharp falls, while several Japanese software and systems developers - NEC, Nomura Research and Fujitsu - tumbled between 8% and 11%, helping push the Nikkei benchmark lower in overnight trade.
Industry voices urged restraint in drawing definitive conclusions about the future of software. Ben Barringer, head of technology research at Quilter Cheviot, argued that AI agents are not yet at the point of destroying software companies, pointing to concerns around security and data ownership and use. He warned that volatility is often amplified by quick, reflexive selling in response to headline developments and that further market turbulence is a plausible outcome.
Some analysts described the market reaction as a pre-emptive repositioning, where investors seek to shield portfolios from a scenario in which AI-native firms or client-built solutions challenge established vendors. J.P. Morgan analyst Toby Ogg said the sector was being treated harshly by investors - "guilty until proven innocent" - and suggested that general appetite to buy into the space had diminished amid worries that clients or new entrants could erode incumbent pricing power.
The immediate catalyst for the selloff was Anthropic’s release of plug-ins for its Claude Cowork agent, introduced the prior Friday. Those plug-ins enable the automation of tasks across areas such as legal work, sales, marketing and data analysis, crystallizing to some investors the prospect that AI could automate functions that long supported software pricing and recurring revenue models.
Advertising stocks viewed as exposed to AI-driven changes in media and marketing also remained under selling pressure. France’s Publicis fell about 4.1% and Britain’s WPP lost roughly 3.3%, both setting new lows in recent trading. Market participants noted that strong performance from chipmaker Nvidia and major cloud providers had pushed parts of the U.S. market to record highs, prompting warnings from a range of policymakers and institutions about the potential for overheating and the risk of a bubble.
Jensen Huang, chief executive of a leading chipmaker, dismissed the notion that AI would replace software and related tools as "illogical," adding that "time will prove itself." His comments reflected a counterpoint from within the technology ecosystem amid the market’s unsettled reaction to recent AI developments.
For now, the market appears to be navigating a period of heightened uncertainty as investors evaluate how rapidly AI capabilities will translate into durable enterprise revenue and how that could reshape the competitive landscape. Analysts and market participants say this reassessment could produce continued swings in share prices as new product announcements and deployment examples alter perceptions of risk and reward across the software ecosystem and its financing channels.
Summary - U.S. software stocks slid further after Anthropic introduced plugins for its Claude Cowork agent, amplifying investor fears that AI could disrupt enterprise software revenue streams. The selloff spread to credit providers and global software and services firms, prompting warnings that volatility may continue as market participants reassess valuations and competitive dynamics.