Mumbai, Feb 05 : Global software equities remained under pressure on Wednesday as investors grappled with the potential impact of artificial intelligence on the industry’s future. The S&P 500 software and services index slipped 0.73%, extending a six-session losing streak after a nearly 4% drop a day earlier. Since January 28, the sector has shed roughly $830 billion in value.
Market sentiment has shifted notably in recent months, with AI increasingly viewed not only as a growth driver but also as a competitive threat. The latest wave of selling followed the launch of a legal focused plug in by Anthropic’s Claude model, designed to handle tasks spanning legal work, sales, marketing and data analytics. The development highlights the rapid expansion of large language models into the application layer territory traditionally dominated by enterprise software providers.
Investors worry that if AI platforms successfully capture these high-revenue segments, the fallout could reach industries ranging from finance and law to programming. Analysts compared the strategy to Amazon’s evolution from an online bookstore into a multi sector powerhouse that disrupted established players.
Still, some experts cautioned against drawing premature conclusions. They noted that many AI systems lack the specialized datasets required for complex enterprise functions, making their long-term dominance uncertain. According to market watchers, the ongoing decline reflects a defensive repositioning by fund managers as fast-paced technological advances cloud earnings visibility beyond the usual three-to-five-year outlook.
“The selloff is a recognition of AI’s disruptive potential,” said James St. Aubin, chief investment officer at Ocean Park Asset Management. He added that competitive barriers once considered strong now appear narrower, though the reaction may be exaggerated. St. Aubin also warned the trend could signal deeper implications for employment.
The turbulence has already hit several major firms. Thomson Reuters plunged nearly 16% on Tuesday before posting a modest rebound, while MSCI and Britain-based Relx also recorded losses. The London Stock Exchange edged lower following a sharp decline in the previous session.
Overall, the S&P 500 software index has dropped about 13% during the latest stretch and sits roughly 26% below its October high. Notably, the typical rush of bargain hunters seen during past tech downturns has yet to materialize.
Concerns spilled into adjacent sectors as well. Shares of alternative asset managers including Apollo, Ares, Blackstone, Blue Owl, Carlyle and KKR fell between 3% and 11% amid fears that prolonged weakness in software companies could trigger credit stress. Some of those stocks recovered modestly on Wednesday.
Ares executive Kort Schnabel said the firm has limited exposure to potentially affected businesses and is closely monitoring those positions, emphasizing that core enterprise software remains resilient.
The broader market also felt the drag. The S&P 500 declined 0.51%, while the Nasdaq Composite lost 1.51%. Major technology names ended lower, with Nvidia, Meta Platforms, Alphabet and Oracle all retreating on heightened AI anxiety.
Bill Strazzullo, chief market strategist at Bellcurve Trading, cautioned that the downturn may not be over and suggested equities could face more downside as valuations adjust.
However, industry leaders pushed back against the narrative that AI will replace traditional software. Nvidia CEO Jensen Huang dismissed such fears as “illogical,” expressing confidence that the technology will complement rather than eliminate existing tools. JPMorgan analyst Mark Murphy echoed that view, calling it a stretch to assume a single AI feature could displace mission-critical enterprise platforms.
Some strategists even argue that improved AI capabilities could ultimately benefit software developers by lowering production costs and enabling more advanced applications, potentially strengthening margins over time.