The rout was triggered by an overnight meltdown in US software stocks after American AI startup Anthropic unveiled 11 new plugins designed to automate a wide range of professional tasks, reigniting fears that artificial intelligence could undermine both the profitability and competitive moats of traditional IT firms.
Over the past 15 years, the worst single-day crash in the Nifty IT index was recorded on April 12, 2013, when it plunged a staggering 12%, according to ACE Equity data. The closest comparable selloff came in 2022, when the index fell 6% in a single session, making today’s plunge the steepest in six years.
In today’s session, Persistent Systems shares crashed over 6%, while heavyweight IT stocks, including Infosys, LTIMindtree, Coforge, TCS, Mphasis and HCL Tech tumbled 6-8% each. Wipro and Tech Mahindra fell 4% and 6%, respectively. The combined market value of Nifty IT index stocks plunged from Rs 31.75 lakh crore to Rs 30 lakh crore.
The selloff was not confined to India. Wall Street’s tech-heavy Nasdaq fell 1.4% on Tuesday, with software stocks shedding approximately $300 billion in market value. Global giants were also hit hard: London Stock Exchange Group Plc fell 13%, Thomson Reuters Corp. plunged 16%, CS Disco Inc. sank 12%, and Legalzoom.com Inc. plummeted 20%.
Why are investors rattled?
Anthropic has expanded its enterprise AI platform, Claude Cowork, with the launch of 11 new plugins designed to automate a broad range of professional tasks. Claude Cowork is an agentic, no-code AI assistant built for corporate users, enabling companies to automate workflows without writing software.
The new plugins span functions such as legal, sales, marketing and data analysis. The latest addition is Anthropic’s Claude Legal agent, which can handle routine legal tasks including document and contract reviews and compliance checks.At the heart of the market reaction is a growing concern that AI could fundamentally reshape the competitive landscape for software and IT services companies, eroding both profitability and market position.
“The fear with AI is that there’s more competition, more pricing pressure, and that their competitive moats have gotten shallower, meaning they could be easier to replace with AI,” said Thomas Shipp, head of equity research at LPL Financial, which has $2.4 trillion in brokerage and advisory assets. “The range of outcomes for their growth has gotten wider, which means it’s harder to assign fair valuations or see what looks cheap.”
Industries once considered relatively safe from AI disruption — including legal services, data analytics and customer support — are now firmly in the crosshairs. If AI can automate these functions, the massive IT services industry built around delivering them could face existential challenges.
Jefferies was among the first to label the market reaction a “SaaSpocalypse”, noting a rapid shift in sentiment “from ‘AI helps these companies’ to ‘AI replaces these companies’.” Jeffrey Favuzza from Jefferies’ equity trading desk described the mood as outright panic. “Trading is very much ‘get me out’ style selling,” he said, according to Bloomberg.
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