A broad selloff in software-linked equities extended into a second trading day on Wednesday as market participants reassessed the potential impact of accelerating artificial intelligence capabilities on established business models. Stocks tied to legal analytics, professional services and enterprise software came under renewed pressure after a legal-oriented plugin for Anthropic’s Claude generative AI chatbot emerged as a focal point for investor anxiety.
In European trade, Britain’s RELX and the Netherlands’ Wolters Kluwer - both providers of analytics to the legal sector - hit fresh lows, each sliding almost 3% in morning trading. London Stock Exchange Group shares fell another 6%, building on a near 13% decline posted on Tuesday.
Markets in Asia also reflected the mood. Indian IT exporters dropped sharply, while Japanese software and systems developers NEC, Nomura Research and Fujitsu declined in the range of 7% to 11%, a slump that weighed on the Nikkei benchmark overnight.
Analysts and investors voiced worries that the selloff may signal broader questions about valuation assumptions for technology firms. JP Morgan analyst Toby Ogg said investor concerns are concentrated on longer-term growth assumptions - problems that extend beyond typical three-year forecasting windows. "The sector isn’t just guilty until proven innocent but is now being sentenced before trial," he said, adding that overall willingness to buy into the sector remains low. Ogg noted that software companies face multiple risks, including competition from AI-native entrants and customers opting to develop in-house capabilities.
Anthropic the spark behind the selloff
One proximate trigger for the earlier wave of selling was the launch of Anthropic’s legal plug-in for its Claude chatbot, which served as a fresh reminder to investors about the possible threat to businesses viewed as vulnerable to AI-driven substitution. Advertising firms - frequently cited as among the most exposed segments of European media to AI disruption - continued to trade under pressure. France’s Publicis slid almost 5% while Britain’s WPP lost 3.3%.
Europe’s largest software company, SAP, also suffered, with shares down more than 3% after the company cut its cloud revenue outlook a week earlier - an event that had already erased roughly $40 billion from its market value.
By contrast, companies closely associated with the AI hardware and cloud infrastructure updraft have shown strong performance. Chipmakers such as Nvidia and major cloud platform providers like Microsoft have posted considerable gains, helping push U.S. equity benchmarks to record highs even as concerns mount elsewhere in the tech complex.
Market watchers and policymakers are increasingly attuned to the possibility that exuberance around AI could feed into a broader technology bubble, with potential implications for financial stability. Institutions including the International Monetary Fund and the Bank of England have issued warnings about elevated risks as market enthusiasm for AI-intensive names grows.
“All innovation means there is going to be disruption at some point, and we appear to be at a significant point in that journey for software and IT services companies," said Ben Barringer, head of technology research at Quilter Cheviot. "There is a lot of uncertainty around exactly what AI agents can do, and as such, investors are choosing to shun the software market altogether, leaving nowhere to hide."
The current environment highlights a clear bifurcation: firms positioned to benefit from AI infrastructure and chips have seen remarkable gains, while companies offering analytics, legal and professional technology services face renewed investor scrutiny about their growth trajectories and vulnerability to automated alternatives.
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