US Stocks Slide On AI Fears

Anthropic’s legal automation tools trigger sharp sector sell-off

US equities fell sharply as fresh concerns about the disruptive impact of artificial intelligence spread through software and analytics stocks, wiping billions from valuations on both sides of the Atlantic.

The Nasdaq Composite dropped 1.4 per cent, while the broader S&P 500 fell 0.8 per cent. The declines were driven by heavy losses among data, ratings and enterprise software providers after AI start-up Anthropic unveiled new productivity tools for its Claude Cowork platform designed to automate complex legal tasks.

The tools promise to streamline contract reviews, compliance workflows and legal briefings, raising questions about the durability of established revenue models across professional services and information providers.

Software stocks bear the brunt

The reaction was swift and severe. Shares in Gartner plunged 21 per cent, while S&P Global fell 11 per cent. FactSet lost 11 per cent and Moody's declined 9 per cent.

Consumer and credit analytics groups were also caught in the downdraft. Intuit and Equifax each dropped more than 10 per cent.

A JPMorgan index tracking US software stocks slid 7 per cent on the day, extending its losses this year to 18 per cent. Traders described the move as one of the most indiscriminate sell-offs in the sector in recent memory.

Market participants said the scale of the declines reflected mounting anxiety that generative AI systems are moving rapidly from experimental tools to commercially viable substitutes for specialist, high-margin services.

Second-order AI effects

The sell-off came only a day after enthusiasm had returned to parts of the technology sector following a heavily oversubscribed $25bn bond offering by Oracle. Investors had interpreted the deal as evidence that demand for AI infrastructure remained robust.

Yet Tuesday’s moves highlighted what some described as the “second-order effects” of AI deployment. If AI tools reduce the need for human-led research, analytics and advisory services, the implications extend beyond traditional software vendors to the hyperscale cloud providers that supply their computing power.

Shares in Nvidia fell 2.8 per cent, while Microsoft declined 2.9 per cent. Oracle lost 3.4 per cent. Investors questioned whether slower growth among enterprise software clients could ultimately damp demand for cloud infrastructure from groups such as Microsoft, Amazon and Alphabet.

The concern is straightforward. If AI tools can directly perform legal analysis, compliance checks or financial research, clients may spend less on traditional subscription-based platforms. That in turn could reduce technology spending across the ecosystem.

Chipmakers under pressure

After the close, shares in Advanced Micro Devices fell around 8 per cent despite the company beating Wall Street expectations for both quarterly revenue and its $9.8bn sales forecast for the current quarter.

Chief executive Lisa Su said the group was entering 2026 with strong momentum driven by rapid expansion in its data centre business. A partnership with OpenAI has positioned AMD as the first customer for its upcoming MI400 AI chips.

Nevertheless, investors are increasingly wary that surging memory chip costs, fuelled by heavy data centre demand, could erode margins for large technology companies including AMD, Intel and Apple.

Private equity groups with significant exposure to software also suffered. Ares Management and KKR each dropped 10 per cent, while Apollo Global Management fell 4.8 per cent.

Global ripple effects

The shockwaves extended beyond the US. In Australia, shares in Xero fell 13.1 per cent and WiseTech Global dropped 8.3 per cent. In Hong Kong, Kingsoft Corporation declined 5.7 per cent. Indian IT services groups including Infosys and Tata Consultancy Services also sold off in early trading.

In Europe, legal and financial information providers faced acute pressure. Shares in RELX fell 14.4 per cent in London, erasing more than £6bn in market value. The group owns LexisNexis, a leading legal analytics platform, and had been regarded as well positioned to benefit from AI through its proprietary data assets.

Rival publisher Wolters Kluwer dropped 12.7 per cent in Amsterdam.

London Stock Exchange Group fell 12.8 per cent, its worst one-day performance in five years. LSEG licenses certain financial data to Anthropic and generates significant earnings from its Workspace platform, a competitor to Bloomberg terminals used widely by investment professionals.

Advertising groups were not spared. Publicis Groupe fell 9 per cent, WPP declined nearly 12 per cent and Omnicom Group dropped more than 11 per cent in the US.

Defensive rotation

The scale of the moves prompted comparisons with the sharp sell-off earlier in the AI cycle following advances by Chinese start-up DeepSeek, which at the time wiped hundreds of billions of dollars from major US technology stocks.

On this occasion, investors rotated into sectors perceived as less exposed to AI disruption. Transport and consumer staples stocks outperformed as software and analytics names tumbled.

Some investors argued that the reaction reflected herd behaviour and fragile positioning rather than a fundamental reassessment of earnings prospects. Many portfolio managers had already reduced exposure to software stocks in recent months amid growing debate over AI risk, leaving the sector vulnerable to sharp swings.

Even so, the episode underscores a central tension in today’s technology markets. AI infrastructure providers have been rewarded for enabling the next wave of computing power. Yet as generative AI tools become more capable, they may threaten the very enterprise customers that sustain that infrastructure.

For companies built on subscription models for research, analytics and advisory services, the question is no longer whether AI will reshape their markets but how quickly.

Tuesday’s sell-off suggests investors believe the timetable may be accelerating.