Why Anthropic sent software stocks into freefall

AI stocks themselves have taken a battering this year, but now concerns that AI might actually be useful in some sectors has crashed stocks in data, consultancy, and software firms.

This week, the S&P 500 software and services index slipped nearly 5%, according to Reuters, losing $830 billion in market value in a week that saw six straight days of losses.

On Tuesday, legal giant Thomson Reuters slipped 18%, leading to its lowest close since June 2021, while legal analytics companies RELX and Wolters Kluwer both posted double-digit stock slides.

So what’s going on? Investors pinned the blame on a series of sector-specific plugins released by Anthropic last week for its Cowork tool.

These could prove useful in areas such as legal, sales, marketing and data analytics – and that's hit software companies that target those industries.

What is Claude Cowork?

Last month, Anthropic unveiled Cowork, offering an agent capable of handling multi-step tasks and working with users' actual files. Two weeks later, Anthropic added support for plugins to "turn Claude into a specialist".

These plugins let users tell Claude Cowork how to complete work, which tools or data to use, and give it a framework for handling critical workflows.

"Plugins work for any use case, but they're especially powerful for tailoring Claude to specific job functions like sales, legal, and financial analysis," the company said in a blog post.

Anthropic pointed to sales as an example, saying a company could connect Claude to its CRM and knowledge base, teach it sales processes, and set up commands to handle research or even make follow-up calls.

At launch, the Cowork marketplace has 11 plugins covering productivity, enterprise search, sales, finance, data, legal, marketing, customer support, product management, and biology research.

There’s even a plugin to make or customize your own plugins. So far, the system is a research preview for paid Claude users.

AI vs software and services

Cowork clearly has some convinced that AI-related disruption is imminent and spooked investors.

"I think Anthropic came out with some plug-ins to tackle the legal space," Mike Archibald, a portfolio manager at AGF Investments in Toronto, told Reuters.

"Obviously, that's where Thomson Reuters generates a good chunk of their revenues. Sometimes the market just shoots first and asks questions later."

Indeed, any impact on those markets is yet to be seen, and previous efforts to use AI in such sectors has proven problematic.

Lawyers have been caught out using fake citations, with one law firm banning staff from using AI, while consultancy Deloitte had to pay back fees to the Australian government after AI-caused errors were spotted in a report.

But the Anthropic plugin release appears to have convinced some investors that more targeted AI tools may have a significant impact – and not just across the legal world.

There’s been a significant share price decline among professional services firms such as Morningstar, Experian and Sage, while advertising giants such as Omnicom and Publicis fell 11% and 9% earlier this week.

"Investors are aggressively repricing these areas as the historical 'visibility premium' erodes; the speed of AI advancement makes long-term valuations harder to defend, particularly as AI tools allow businesses to do more with fewer staff, threatening the traditional model of charging per software user," said Schroders analyst Jonathan McMullan told Reuters.

Not the end of software

Not everyone was convinced, however, including Jensen Huang. Speaking during the Cisco AI Summit this week, the Nvidia CEO dismissed the idea that AI will render the software industry obsolete.

"There's this notion that the tool in the software industry is in decline, and will be replaced by AI ... It is the most illogical thing in the world, and time will prove itself," he told attendees.

"If you were a human or robot, artificial, general robotics, would you use tools or reinvent tools? The answer, obviously, is to use tools ... That's why the latest breakthroughs in AI are about tool use, because the tools are designed to be explicit."

Software and services stocks fell, but so too did AI companies and the wider tech industry – though they didn't post such dramatic declines. Nvidia, Meta, Microsoft and Oracle all saw share prices fall 2%-3%.

FOLLOW US ON SOCIAL MEDIA

Make sure to follow ITPro on Google News to keep tabs on all our latest news, analysis, and reviews.

You can also follow ITPro on LinkedIn, X, Facebook, and BlueSky.