{"id":342,"date":"2026-02-05T08:01:04","date_gmt":"2026-02-05T08:01:04","guid":{"rendered":"http:\/\/www.duckpi.com\/software\/?p=342"},"modified":"2026-02-05T08:01:04","modified_gmt":"2026-02-05T08:01:04","slug":"traders-dump-software-stocks-as-ai-fears-erupt","status":"publish","type":"post","link":"https:\/\/www.duckpi.com\/software\/?p=342","title":{"rendered":"Traders Dump Software Stocks as AI Fears Erupt"},"content":{"rendered":"<p><iframe loading=\"lazy\" width=\"480\" height=\"270\" src=\"\/\/www.youtube.com\/embed\/sJuGgi-Zuzw\" frameborder=\"0\" allowfullscreen><\/iframe><\/p>\n<p>Wall Street has been skeptical about software stocks for a while, but sentiment has gone from bearish to doomsday lately with traders dumping shares of companies across the industry as fears about the destruction to be wrought by artificial intelligence pile up. The anxiety was underscored Tuesday after AI startup Anthropic released a productivity tool for in-house lawyers, sending shares of legal software and publishing firms tumbling. \u201cWe call it the \u2018SaaSpocalypse,\u2019 an apocalypse for software-as-a-service stocks,\u201d said\u00a0Jeffrey Favuzza, who works on the equity trading desk at Jefferies. \u201cTrading is very much \u2018get me out\u2019 style selling.\u201d Bloomberg Intelligence Senior Global Head of Technology Research Mandeep Singh joins Bloomberg Businessweek Daily to discuss. He speaks with Carol Massar and Tim Stenovec.<br \/>\n\u00a0Tech stocks pushed US equites lower as traders assessed the damage from the artificial intelligence-driven selloff in software firms and poured over the latest earnings reports.<br \/>\nThe\u00a0Nasdaq 100 Index\u00a0slumped\u00a01.6%\u00a0at\u00a012:03 p.m.\u00a0in New York falling as much as 2% earlier in the day.\u00a0Advanced Micro Devices Inc.\u00a0plunged following an underwhelming earnings report. The\u00a0S&amp;P 500 Index\u00a0fell\u00a00.4%. The\u00a0Cboe Volatility Index\u00a0hovered near\u00a019.<br \/>\n\u201cThis is a rotation, not a rupture,\u201d said\u00a0Mark Hackett, chief market strategist at Nationwide. \u201cTech is stepping back as cyclical and defensive stocks step up, and while Tuesday\u2019s volatility caught attention, the data points to a technical reset, not a fundamental break. Seeing that shift near record highs highlights the market\u2019s underlying strength.\u201d<br \/>\nA rotation out of software stocks showed little sign of abating on Wednesday as investors worried about business risks they face from better AI tools. The\u00a0iShares Expanded Tech-Software Sector ETF\u00a0dropped\u00a02.3%, with\u00a0AppLovin Corp.\u00a0and\u00a0Unity Software Inc.\u00a0being among the biggest decliners.<br \/>\n\u201cAI is not being abandoned by markets,\u201d said\u00a0Charu Chanana, chief investment strategist at Saxo. But \u201cit is being priced more carefully.\u201d<br \/>\nWeakness in software stocks points to\u00a0lingering\u00a0fears of disruption by newly-released tools from Anthropic PBC. Products including Claude Code and Cowork illustrate that AI is moving beyond web-based chatbots and into algorithms that can automate a slew of enterprise workflows.<\/p>\n<p>Kathleen Brooks, research director at XTB, sees software stocks remaining under pressure in the near term. However, she stresses that it is \u201cnot all bad\u201d for the AI supply chain.<br \/>\n\u201cMemory and chip makers will be necessary to power Anthropic\u2019s latest tools and the others that come after it,\u201d said Brooks. \u201cThe AI trade is not moving in unison in 2026, and idiosyncratic factors may continue to drive stocks in the short term.\u201d<br \/>\nInstead of trading in unison, traders are \u201cgetting picky about which companies they want exposure to,\u201d she added.<br \/>\nThe risk goes beyond just software, however. Bank of America analyst\u00a0Ebrahim Poonawala\u00a0noted that financials stocks that were viewed as exposed to software names sold off sharply given potential risk to earnings. He also stressed the need to be cautious.<br \/>\n\u201cWhile the AI-led disruption risk and its timing are debatable, investors would need to be alert to this when assessing downside risks to revenue growth and credit quality outlooks for the banks,\u201d Poonawala wrote in a note published on Wednesday.\u00a0<br \/>\nPoonawala highlighted a\u00a0Conference Board study\u00a0released in October, which said 72% of companies on the S&amp;P 500 had flagged AI as a material risk in their public disclosures \u2014 up from 12% in 2023.<br \/>\nBut while the news for software stocks \u201cgets worse by the day,\u201d Miller Tabak\u2019s\u00a0Matt Maley\u00a0sees a recovery on the horizon for the sector.<br \/>\n\u201cNo matter where they are headed over the intermediate and long-term, they are getting poised for a nice bounce over the near-term,\u201d Maley said. \u201cIt might not begin exactly today but investors should be careful about negative bets over the short-term.\u201d<\/p>\n<p>&#8212;&#8212;&#8211;<br \/>\nWatch Bloomberg Radio LIVE on YouTube<br \/>\nWeekdays 7am-6pm ET<br \/>\nWATCH HERE: http:\/\/bit.ly\/3vTiACF<\/p>\n<p>Follow us on X: https:\/\/twitter.com\/BloombergRadio<\/p>\n<p>Subscribe to our Podcasts:<\/p>\n<p>    Bloomberg Daybreak: http:\/\/bit.ly\/3DWYoAN<br \/>\n    Bloomberg Surveillance: http:\/\/bit.ly\/3OPtReI<br \/>\n    Bloomberg Intelligence: http:\/\/bit.ly\/3YrBfOi<br \/>\n    Balance of Power: http:\/\/bit.ly\/3OO8eLC<br \/>\n    Bloomberg Businessweek: http:\/\/bit.ly\/3IPl60i<\/p>\n<p>Listen on Apple CarPlay and Android Auto with the Bloomberg Business app:<br \/>\nApple CarPlay: https:\/\/apple.co\/486mghI<br \/>\nAndroid Auto: https:\/\/bit.ly\/49benZy<\/p>\n<p>Visit our YouTube channels:<br \/>\nBloomberg Podcasts: https:\/\/www.youtube.com\/bloombergpodcasts<br \/>\nBloomberg Television: https:\/\/www.youtube.com\/@markets<br \/>\nBloomberg Originals: https:\/\/www.youtube.com\/bloomberg<br \/>\nQuicktake: https:\/\/www.youtube.com\/@BloombergQuicktake<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Wall Street has been skeptical about software stocks for a while, but sentiment has gone from bearish to doomsday lately [&hellip;]<\/p>\n","protected":false},"author":0,"featured_media":343,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-342","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v17.6 - 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