Global software stocks hit by Anthropic wake-up call on AI disruption

• European legal analytics firms RELX and Wolters Kluwer hit new lows with 3% declines, while LSEG fell 6% after a 13% drop the previous day; Japanese developers NEC, Nomura Research and Fujitsu dropped 7-11%
• JP Morgan analyst noted investors have 'generally low' appetite to buy software stocks, citing risks from AI-native competition and clients building in-house AI solutions, with the sector being 'sentenced before trial'
• SAP dropped over 3% a week after losing approximately $40 billion in market value from disappointing cloud revenue forecasts, while advertising firms Publicis and WPP fell 5% and 3.3% respectively on AI exposure concerns

Summary: Global Software Stocks Hit by AI Disruption Fears

Global software stocks experienced a second consecutive day of heavy selling on Wednesday, driven by concerns that AI advancements threaten traditional software business models. The selloff was triggered by Anthropic's launch of a legal plug-in for its Claude generative AI chatbot.

Key Market Movements:

• European legal analytics firms RELX and Wolters Kluwer fell nearly 3%, hitting new lows
• LSEG plunged 6% Wednesday after dropping nearly 13% Tuesday
• Japanese software firms NEC, Nomura Research, and Fujitsu declined 7-11%
• SAP, Europe's largest software company, dropped over 3% following a disappointing cloud forecast that previously wiped $40 billion from its market value
• Advertising companies also under pressure: Publicis fell almost 5%, WPP lost 3.3%

Analyst Perspectives:

JP Morgan analyst Toby Ogg noted investor concerns extend beyond typical three-year forecasts, with "general appetite to step in remains generally low." He emphasized software companies face multiple risks including competition from AI-native firms and clients developing in-house solutions. Ogg warned the sector is being "sentenced before trial."

Broader Context:

The selloff occurs amid warnings from regulators, the IMF, and policymakers about a potentially dangerous tech bubble. While AI chipmakers like Nvidia and hyperscalers like Microsoft have driven stocks to record highs, traditional software and IT services companies face significant disruption uncertainty.

Ben Barringer of Quilter Cheviot characterized this as "a significant point" in the disruption journey, with investors "choosing to shun the software market altogether."