Why software stocks are clawing back after a ‘severe’ hit over AI updates
Global News
Some software stocks began recovering Monday after a multi-day selloff on worries of how new AI developments could take businesses away from a handful of large companies.
Software companies clawed back some losses on Monday after a bruising seven-session selloff fuelled by fears that AI could intensify competition.
The selloff last week came shortly after an AI company called Anthropic revealed updates to its chatbot known as Claude, an advanced large language model, or LLM, similar to ChatGPT and Gemini that industry-watchers are monitoring for its potential in processing large and lengthy documents used in health care, finance, legal and manufacturing sectors among others.
“What we saw in the market for stocks was a pretty severe reaction from software stocks, specifically,” says Josh Sheluk, portfolio manager and chief investment officer at Veracan Capital Management.
“They sold off aggressively in the guise of perhaps this software from Anthropic is going to either displace some of the software that’s out there that has been so dominant for so long, or perhaps make it a lot easier for people to get very cost-effective substitutes.”
Anthropic, which is financially backed by Amazon and Google’s parent company, Alphabet, said on Feb. 5 that Claude was recently updated, and can now work on tasks for longer and more reliably.
“Claude can be used with legal compliance, where you try to review the contracts, want to analyze policy, and definitely with education and research. So its applicability is everywhere,” says Saiqa Aleem, an assistant professor at Wilfrid Laurier University in the Department of Computer Science and Physics.
“So that’s why people are thinking, ‘OK, we don’t need, maybe DocuSign or something like that.'”
As of publication, shares of Salesforce, Adobe and DocuSign had each lost between 3.5 per cent and 5.5 per cent in their value over the past five trading days.
