First, there is the fear that AI generated apps will replace existing software companies. This from Benji Edwards at Ars:
These releases occurred during a week of exceptional volatility for software stocks. On January 30, Anthropic released 11 open source plugins for Cowork, its agentic productivity tool that launched on January 12. Cowork itself is a general-purpose tool that gives Claude access to local folders for work tasks, but the plugins extended it into specific professional domains: legal contract review, non-disclosure agreement triage, compliance workflows, financial analysis, sales, and marketing.
By Tuesday, investors reportedly reacted to the release by erasing roughly $285 billion in market value across software, financial services, and asset management stocks. A Goldman Sachs basket of US software stocks fell 6 percent that day, its steepest single-session decline since April’s tariff-driven sell-off. Thomson Reuters led the rout with an 18 percent drop, and the pain spread to European and Asian markets.
The purported fear among investors centers on AI model companies packaging complete workflows that compete with established software-as-a-service (SaaS) vendors, even if the verdict is still out on whether these tools can achieve those tasks.
Ben Thompson has a deeper pondering of this w/r/t to Microsoft. If you want a really raw take on this angle, check out Adam Jacob’s talk at cfgmgmtcamp this week.
Another theory goes that Wall Street is doing the math on all that build-out spend. This from today’s Economist brief:
Shares in Amazon fell by as much as 10% after the tech giant said it planned to spend $200bn this year on capital expenditure, which includes data centres and other AI-related projects. Investors are worried about overinvestment hurting short-term profits. Sales in Amazon Web Services, the firm’s cloud unit, rose by 24% in the fourth quarter compared with a year earlier.