NEW YORK, Feb. 4, 2026 — Global software stocks have shed nearly $830 billion in value over six trading days, marking one of the deepest selloffs in years. The S&P 500 software and services index fell almost 4% on Tuesday, followed by a further decline of 0.73% on Wednesday. Analysts say the plunge reflects investor unease about how artificial intelligence is moving from a supportive tool to a potential disruptor. Businesses once protected by established market positions now face the possibility that AI could redefine revenue models and profit margins.

AI Tools Reach into Enterprise Services

The latest selloff was triggered by a new legal plug-in from Anthropic’s Claude large language model, designed to perform tasks across law, sales, marketing, and data analysis. The tool demonstrates how AI is entering the application layer, where software companies derive significant revenue. Investors fear that if these AI systems succeed, industries from finance to coding could see existing business models upended.

AI Penetrates Specialized Sectors: Legal and compliance departments have seen early adoption of AI tools capable of drafting contracts, summarizing cases, and even predicting litigation outcomes. These systems reduce time spent on routine tasks and allow smaller teams to manage workloads that previously required more staff. For investors, this signals that software once considered essential may face competition from AI solutions that are faster and cheaper. Companies that fail to integrate AI risk losing both clients and market share.

AI Challenges Existing Enterprise Models: Sales and marketing departments are also experimenting with AI to generate leads, automate outreach, and analyze client behavior in real time. These capabilities threaten traditional subscription-based software models, as businesses may pay less for standard software while relying more on AI services. The broader implication is a shift in how revenue is generated and how companies maintain customer loyalty. The selloff reflects investor uncertainty over which firms will adapt successfully and which may see profits eroded.

Analysts Question Longevity of AI Advantage

Despite investor fears, some analysts caution that the success of these AI tools is far from guaranteed. Large language models often lack the specialized data required for complex enterprise tasks. The rapid technological progress has made it difficult to assess company valuations beyond the typical three- to five-year horizon. Portfolio managers are reassessing risk as AI creates both uncertainty and opportunity. James St. Aubin, chief investment officer at Ocean Park Asset Management, described the selloff as an awakening to AI's disruptive potential, noting that traditional competitive moats feel narrower under the weight of new AI products.

Market Reactions Vary Across Firms

Recent trading highlights how unevenly the market responds to AI developments. Thomson Reuters, which owns the Westlaw database, fell nearly 16% after consecutive losing sessions but rebounded slightly on Wednesday. MSCI dropped 1.8% following a 7% loss in the previous session. Britain's Relx slipped 1.3% after a 14% decline, while the London Stock Exchange eased 0.1% following a 13% drop. Despite lower prices, bargain hunters have remained cautious, and investors are debating whether the sector has overreacted or simply entered a period of heightened volatility.

Long-Term Implications for Business Strategy

Software companies now face a strategic crossroads. Investors are questioning which businesses can adapt to AI-driven change and which may see revenues disrupted. The selloff has underscored the urgency of monitoring AI developments closely, while also testing assumptions about market stability. As the technology continues to evolve, executives and shareholders must weigh the opportunities and risks inherent in adopting AI across enterprise operations. The current turbulence signals that the next phase of innovation may reshape not just software, but the broader economy.