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US tech stocks fell sharply on Tuesday as fresh concerns about the impact of AI on software businesses swept across Wall Street.
The tech-heavy Nasdaq Composite fell 2.2 per cent, while the broader S&P 500 was down 1.4 per cent. Markets were dragged lower by large declines for a host of analytics groups following AI group Anthropic’s launch of productivity tools for its Claude Cowork platform that can help automate legal work.
Analytics groups Gartner and S&P Global fell 21 per cent and 10 per cent respectively, while Intuit and Equifax both declined 12 per cent. Moody’s fell 8 per cent and FactSet lost 9 per cent.
“Software is getting a shellacking,” said Charlie McElligott at Nomura.
“The irony, the hilarity, is that everyone was breathing a big sigh of relief on the AI hyperscaler trade after Oracle got funding yesterday,” he added, referring to the software group’s several times subscribed $25bn bond offering on Monday. “The second-order impacts of the AI rollout are being felt today.”
Index heavyweights were caught up in Tuesday’s sell-off, with chipmaker Nvidia down 3.7 per cent and Microsoft losing 3 per cent to extend its recent decline. Oracle dropped 4.6 per cent.
“All the software players are clients of the hyperscalers” such as Amazon, Microsoft and Alphabet, said Mike O’Rourke at Jones Trading. “If the guys who are supposed to buy the computing power are being disrupted, that’s bad for the hyperscalers, too.”
“If legal can be disrupted [by Anthropic’s new tool] then so can consulting and financial services,” he added.
Private equity groups, many of which have piled into software in recent years, also fell sharply. Ares Management dropped 9.5 per cent, as did KKR and Apollo fell 7 per cent.
Sectors including transport and consumer staples, which are viewed as relatively immune to AI disruption, advanced as software slipped.
In London, information provider Relx took a hit of more than £6bn alone.
Relx dropped 14.4 per cent on Tuesday, reversing the fortunes of one of the best-performing stocks in recent years and a company widely regarded as one of the UK’s brightest hopes for AI success. Relx owns the leading legal information and analytics platform LexisNexis.
Shares of rival publishers and analytics firms that support legal services also fell sharply, with Wolters Kluwer down 12.7 per cent on Euronext in Amsterdam.
Anthropic’s new legal tool — which promises to automate contract reviews, compliance workflows and legal briefings — was among those launched to automate specific tasks within a company that also covers marketing and customer support.
Shares in European advertising companies also dropped sharply on Tuesday, with Publicis off 9 per cent and WPP down almost 12 per cent. In the US, Omnicom fell almost 8 per cent.
Traditional media companies such as Relx have reinvented themselves as data-led analytics firms, with hopes that they will be among Europe’s AI winners given their access to proprietary data and research.
Relx was in the UK’s top 10 most valuable companies last year, just above Barclays, but recent investor fears over US tech companies bringing in AI tools aimed specifically at corporate clients have begun to erode its share price.
LSEG has a deal with Anthropic to license some of its financial markets data to Claude.
The group also derives substantial earnings from Workspace, a data and news competitor to Bloomberg’s ubiquitous terminals. Workspace has more than 350,000 users among portfolio managers, investment banks and wealth advisers.
Shares in LSEG lost 12.8 per cent, its worst one-day performance in five years.