Summary A sharp market selloff linked to AI disruption fears has wiped out nearly US$1 trillion in software stock value within days, as investors worry that artificial intelligence is starting to replace core business models , not just hype future growth. What’s Driving the Selloff Unlike past AI pullbacks driven by valuation concerns, this rout is fuelled by real-world evidence that AI tools may soon displace entire categories of software jobs and services . The trigger was Anthropic’s launch of an AI legal tool , which reignited fears that AI could rapidly move beyond coding into legal, sales, marketing, and finance functions . Key Market Impacts Nearly US$1 trillion wiped out from software stocks tracked by an iShares ETF in just seven days Software stocks at the epicentre , but selling has spread to hardware, services, lenders, and private equity Over US$17.7bn of US tech loans now trade at distresse...
Summary
A sharp market selloff linked to AI disruption fears has wiped out nearly US$1 trillion in software stock value within days, as investors worry that artificial intelligence is starting to replace core business models, not just hype future growth.
What’s Driving the Selloff
Unlike past AI pullbacks driven by valuation concerns, this rout is fuelled by real-world evidence that AI tools may soon displace entire categories of software jobs and services.
The trigger was Anthropic’s launch of an AI legal tool, which reignited fears that AI could rapidly move beyond coding into legal, sales, marketing, and finance functions.
Key Market Impacts
Nearly US$1 trillion wiped out from software stocks tracked by an iShares ETF in just seven days
Software stocks at the epicentre, but selling has spread to hardware, services, lenders, and private equity
Over US$17.7bn of US tech loans now trade at distressed levels
Global spillover hits UK and Indian IT giants like LSEG, Tata Consultancy Services, and Infosys
Even AI “Winners” Are Feeling the Heat
Alphabet warned AI capital spending will rise further
Arm Holdings issued weaker-than-expected revenue guidance
Microsoft revealed just 15 million paid Copilot users, a small fraction of its total user base
These signs have raised doubts about how fast AI investments can translate into meaningful revenue.
Why Investors Are Nervous
AI is no longer theoretical — investors see early signs of actual business displacement
Fear that AI-native firms may outpace incumbents in innovation
Selling has become self-reinforcing, as falling prices trigger momentum-driven exits
As one strategist put it: “We started selling software — now we’re selling everything.”
Big Picture
Markets are entering a re-pricing phase, trying to sort out AI winners vs losers much earlier than expected. While most software companies haven’t yet missed earnings, confidence in long-term moats is weakening fast.
This may be the first true stress test of AI’s impact on traditional tech business models.
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