AI agents are making it a hard time to be a software provider.
Driving the news: A widespread sell-off of software stocks entered its second day yesterday, with panic spreading from North American and European markets to Asia-Pacific as investors sought to dump any and all companies they felt were exposed to AI risks.
One notable name listed on Canada's main stock index that took a beating was Thomson Reuters, which was down 14% over two days.
Why it’s happening: Investors are worried that increasingly capable AI agents could decimate the business models of software providers by offering a one-stop shop for automating a variety of tasks that previously required multiple services. This recent sell-off was sparked by the launch of new plugins for Anthropic’s Claude Cowork AI agent, in particular, a tool automating legal tasks.
Even though the industry's top dog, Nvidia CEO Jensen Huang, came out and said that the fear of total replacement of software by AI agents was "illogical," his words haven’t quelled fears.
Why it matters: This is the latest example of how AI has eaten the stock market alive, and specifically, how new product releases can cause sudden unpredictable swings. As companies like Anthropic and ChatGPT keep trying to find ways to justify gargantuan investments, expect new developments to trigger more seismic market shifts.—QH