Stocks experienced a significant downturn on Tuesday, with a notable sell-off in shares of software companies, driven by growing concerns that advancements in artificial intelligence (AI) could disrupt their business models. The technology sector was the most affected, causing the S&P 500 to close down by 0.8%. The Nasdaq Composite, heavily weighted with tech stocks, fared even worse, plunging 1.4%.
The selling pressure was largely triggered by an announcement from AI startup Anthropic. The firm introduced an automated agent capable of handling tasks in legal services, data analytics, finance, and sales. This news gained visibility after being highlighted by a legal industry publication, igniting fears among investors about the potential impact of AI on existing tech companies.
JPMorgan Chase analysts pointed out that while many AI laboratories have been innovating for years, the rapid progression observed at Anthropic was particularly striking. They cited the swift evolution of Anthropic’s Claude Code, an AI agent that can generate computer code, which they noted developed from a research tool to a billion-dollar product in just six months.
In response to these developments, several companies experienced substantial stock declines. Salesforce.com shares dropped nearly 7%, while data provider Thomson Reuters saw a staggering 16% fall. CoStar, a real estate data provider, lost 15%, and the London Stock Exchange Group, a key supplier of stock market data tools, fell by 12%. Analysts highlighted the early-stage nature of the product but expressed mounting concern that AI-native companies could encroach on the legal tech market, posing threats to established players, including larger firms.
Other data-centric companies also faced sharp declines, with shares of Intuit, S&P Global, Equifax, Workday, and Atlassian all falling around 10%. Additionally, PayPal added to the Nasdaq’s woes by reporting disappointing earnings alongside a leadership change, which resulted in its stock tumbling more than 20%.
Cryptocurrency markets weren’t spared from the selling pressure either. Bitcoin, the largest cryptocurrency, experienced a sharp drop of up to 6.7%, hitting its lowest point since November 2024, shortly after recovering to trade down more than 2% at around $76,600. The cryptocurrency has suffered a decline of over 24% in the past year and continues to trend down in 2023 amid a broader pivot away from riskier assets.
Despite the overall negative sentiment on Wall Street, not all stocks were negatively impacted. Shares of Palantir, a company that has benefitted from the AI boom, surged more than 6% following an earnings report that exceeded traders’ expectations. Additionally, stocks in the energy sector and consumer staples showed positive movement, providing some balance amidst the broader market downturn.
