The sharp sell-off followed an announcement by US artificial intelligence startup Anthropic, which unveiled a new tool designed specifically for corporate legal teams. Anthropic, the company behind the Claude chatbot, said the product is capable of automating several legal functions, including contract reviews, non-disclosure agreement triage, compliance workflows, legal brief preparation and standardised responses.
This development has added to the already bearish sentiment surrounding software stocks, as investors increasingly worry about intensifying competition and margin pressure stemming from widespread AI adoption. Reflecting this nervousness, Wipro’s ADRs fell 4.8% to close at $2.56, while Infosys ADRs declined 5.6% to end at $17.32. Market participants fear that as AI tools become more capable, technology companies could struggle to defend pricing power and sustain profitability.
International brokerage Jefferies, in a report dated February 2, said it has reduced its exposure to the IT sector in its latest India model portfolio rejig. The brokerage noted that its India portfolio weight for the sector now stands at 5.6, significantly below the MSCI India weight of 9.7. Jefferies’ cautious stance comes against the backdrop of sustained foreign portfolio investor outflows, with overseas investors pulling out $34 billion from Indian equities over the past 16 months. The IT sector has been among the worst affected during this period.
Anthropic sought to temper concerns by clarifying that its plugin does not provide legal advice. “AI-generated analysis should be reviewed by licensed attorneys before being relied upon for legal decisions,” the company said. Alongside the legal-focused tool, Anthropic also announced several open-source products aimed at automating a broad range of professional tasks, including sales and customer support.
Founded in 2021, Anthropic was set up by chief executive Dario Amodei and other former OpenAI employees, the company that developed ChatGPT.
Meanwhile, US markets also reflected the broader tech-led weakness. The S&P 500 slipped 0.84% to close at 6,917.81, while the Nasdaq fell 1.43% to 23,255.19. The Dow Jones Industrial Average was comparatively resilient, ending 0.34% lower at 49,240.99. Among individual stocks, AI heavyweights Nvidia and Microsoft slid nearly 3% each. Alphabet dropped 1.2% ahead of its earnings report on Wednesday, while Amazon declined 1.8% ahead of its results due on Thursday.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)