A sharp selloff in global stock markets wiped out about $285 billion in market value in a single day after Anthropic launched its new AI tool called the ‘SaaSpocalypse’. America’s biggest bank JPMorgan said the fall reflects a deeper shift in how investors view software companies, especially as concerns around artificial intelligence grow. In a note to investors, JPMorgan analyst Toby Ogg said investors are no longer giving software firms the benefit of the doubt. “We are now in an environment where the sector isn’t just guilty until proven innocent but is now being sentenced before trial,” Ogg said.For software companies, “better-than-expected results are no longer enough to convince the market,” Ogg wrote. That’s unless “they can demonstrate irrefutably that AI is a sustainable tailwind to growth rather than a longer-term headwind,” he said.According to a Bloomberg report, his comments help explain why the selling pressure has continued even after prices dropped sharply, justifying fears that the sector is being punished more aggressively than before. He added that investor sentiment toward software companies has turned sharply negative and remains weak.Ogg said he met more than 50 investors across Europe and the US over the past two weeks. According to him, many of these investors have cut their software holdings over the last 12 to 18 months. Even after the recent decline, “the general appetite to step in remains generally low,” he said.
AI fears drive the selloff
The latest rout was triggered by worries that new AI tools could disrupt existing business models. As mentioned above, the selling accelerated after Anthropic released a new AI automation tool, raising concerns that many software companies could face stronger competition.Investors are worried that advances in generative AI may reduce demand for traditional software products or weaken long-standing pricing models. One concern highlighted by Ogg is seat-based pricing, where companies charge customers per user. AI tools could reduce the number of logins needed to complete tasks, which may hurt revenue.
Impact spreads to other regions
The selloff spread beyond the US to Asia and Europe, Bloomberg report says. A UBS basket of European companies seen as vulnerable to AI disruption fell another 2.1% after dropping 8% a day earlier. Shares of companies such as SAP SE and Sage Group Plc continued to decline.
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