AI disruption risk reshapes stock market as software stocks tumble while hardware firms surge
21 Sources
[1]
Stocks in OpenAI's Orbit Get Second Look as Traders Eye Rebound
OpenAI's next funding round will give a sense of how comfortable investors are about funding the company's money-losing operations, with the company looking to raise up to $100 billion and Nvidia reportedly closing in on a deal to invest $20 billion. Artificial intelligence has made a lot of noise
[2]
For stock market, AI turns from lifting all boats to sinking ships
NEW YORK, Feb 12 (Reuters) - Investors are discovering that the artificial intelligence landscape is not just fertile ground for stocks -- it is also a minefield. Enthusiasm about AI's profitability has fueled the U.S. bull market, with stock gains for technology companies and others tied to the
[3]
Will software eat the creditors?
In a capital markets fracas, equity portfolio managers roll with the punches. Sure, some of their software-as-a-service holdings may have cratered, but as long as they pick a few winners they could be fine. Lenders, by contrast, do their best to avoid brawls altogether. Credit -- the joke goes --
[4]
The AI narrative now has a new trade -- shorting software stocks
Software and data services stocks remain under pressure after Anthropic's rollout of a legal automation tool reignited fears of AI-driven disruption -- and now one fund manager says that shorting software has become the market's newest expression of the AI trade. Software names -- along with data
[5]
AI Loser Software Stocks Overshadowed as Hardware Earnings Jump
Europe's software companies are set for slower earnings growth than their hardware counterparts this year, compounding fears in global markets that artificial intelligence will reshape software firms' business models. Europe's software companies -- the firms whose services could be disrupted by
[6]
AI‑led software selloff may pose risk for $1.5 trillion U.S. credit market, says Morgan Stanley
Feb 10 (Reuters) - Concerns that artificial intelligence could disrupt large parts of the software industry have started to spill into credit markets, Morgan Stanley warned, as software accounts for about 16%, or $235 billion, of the $1.5 trillion U.S. loan market. WHY IT'S IMPORTANT Financial
[7]
Private credit worries resurface in $3 trillion market as AI pressures software firms
Apollo Global Management signage in New York on Dec. 5, 2023.Jeenah Moon | Bloomberg | Getty Images Private credit markets are facing fresh uncertainty as AI-driven tools start to pressure software companies, a major borrower group for private lenders. The software industry came under renewed
[8]
The New AI Stock Trade Is Dumping Any Company In Its Crosshairs
On Wall Street, rising fears about artificial intelligence keep pummeling the shares of companies at risk of being caught on the wrong side of it all, from small software companies to big wealth-management firms. The latest selloff erupted on Tuesday when a tax-strategy tool rolled out by a
[9]
It's not just stocks. Software gets rattled in the debt market.
Why it matters: There are signs of rising financial stress for software makers, public and private, but as we head into the week, there are some reasons to believe a di-SaaS-ter could be averted. The big picture: Everything is SaaS these days -- nearly every piece of software people use,
[10]
How a software meltdown will shake private markets
LONDON, Feb 5 (Reuters Breakingviews) - Public market investors are freaking out about artificial intelligence. Yet the pain may be even more dramatic in the worlds of private equity and credit. Buyout barons and direct lenders -- think of Vista Equity Partners, EQT (EQTAB.ST), opens new tab, Thoma
[11]
AI Fear Grips Wall Street as a New Stock Market Reality Sets In
For months, investors have been growing increasingly anxious about how artificial intelligence will potentially transform the economy. Last week, those concerns suddenly spilled over into the stock market. The culprit was AI startup Anthropic, which released new tools designed to automate work
[12]
AI Is Tanking Financial Stocks a Week After Software
Want more stock market and economic analysis from Phil Rosen directly in your inbox? Subscribe to Opening Bell Daily's newsletter. When it comes to AI, investors have made a habit of selling first and asking questions later. The same instinct that crushed software stocks last week led to a
[13]
Blackstone Is Finalizing $3.5 Billion Loan for Australia AI Firm
Private credit giant Blackstone Inc. is finalizing a loan of more than A$5 billion ($3.5 billion) to fund the data center expansion of Australian startup Firmus Technologies Pty., people familiar with the matter said, the latest in digital infrastructure funding tied to the AI boom. The completion
[14]
Some Experts Argue Software Stock Sell-Off Was 'Too Harsh' Despite AI Fears
Jefferies sees opportunity for software companies that can adapt to AI transformation and leverage their vast pools of data. All the talk of AI "eating" software could have some investors eating their words, according to a recent Jefferies report. A rough year for software stocks morphed into
[15]
US stock market | Wall Street's new trade is dumping any stock in AI's crosshairs
Wall Street is experiencing a sell-off in companies perceived to be at risk from AI advancements. Recent product launches, like Altruist's tax-strategy tool, have triggered significant stock declines in wealth management and other sectors. Investors are now prioritizing avoiding disruption over
[16]
The 'AI-Phobia' Hammered These 4 Sectors: Time To Buy The Dip? - Apollo Global Management (NYSE:APO), FedEx (NYSE:FDX)
The market's AI trade just flipped from euphoria to fear, and four major industries are suddenly in the bargain bin. In a note shared Thursday, veteran investor Ed Yardeni said investors have moved from "AI-phoria to AI-phobia," hammering Software, Brokers, Insurers and Asset Managers in just
[17]
Private Capital Titans Rush to Defend Software Companies as AI Rout Deepens
Despite their efforts to calm investor nerves, shares of large alternative asset managers took another dive, with some executives acknowledging that the perception of risk can make sponsors less likely to support their businesses and make refinancing loans more difficult. High finance's new
[18]
The Stock Market's Paradoxical Doomsday: Artificial Intelligence Is Running Out of Gas yet Bound to Replace Software
There are some very complex dynamics currently at play in the stock market. Heading into the year, investors had concerns about artificial intelligence (AI) stocks. Valuations were high, and the hyperscalers are each planning to pour hundreds of billions into AI-related capital expenditures this
[19]
Deutsche Bank Warns Software Debt Faces AI Threat | PYMNTS.com
By completing this form, you agree to receive marketing communications from PYMNTS and to the sharing of your information with our sponsor, if applicable, in accordance with our Privacy Policy and Terms and Conditions. The analysts highlighted concentration risks to the speculative-grade credit
[20]
US Software Stocks Slide as AI Tools Raise Concerns Over Business Models
AI Disruption Fears Hit Software Valuations, Pushing the Sector into Its Deepest Sell-Off Since 2022 US software stocks declined sharply in early February, and the slide unsettled investors who were betting on the AI-related stocks. The impact spread across global markets and pushed software and
[21]
Ripple effects of software rout felt through asset managers
Feb 6 (Reuters) - Asset managers and private equity firms found themselves at the sharp end of the AI-driven shock hitting the software sector as investors fretted over exposure to loans and leverage tied to the industry. The pullback in software - which has wiped out nearly $1 trillion in market
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The stock market is experiencing a dramatic split as AI developments separate winners from losers. Software stocks have plummeted 15% since late January, with investors shorting companies vulnerable to AI disruption. Meanwhile, hardware firms and chipmakers are surging on massive capital spending commitments. The shift reveals growing investor concern over AI's ability to upend traditional business models across industries from legal services to wealth management.
AI Disruption Risk Fractures the Stock Market Landscape
The impact of AI on stock market dynamics has shifted from lifting all technology stocks to creating sharp divisions between winners and losers. Software stocks have faced intense selling pressure, with the S&P 500 software and services index dropping 15% since the end of January
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. This market downturn contrasts sharply with the performance of hardware firms and chipmakers, which are benefiting from massive capital spending commitments by technology giants. The heavyweight software index recently fell to a forward price-to-earnings ratio of 22.7 times, its lowest level in nearly three years2
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Source: Analytics Insight
Investor sentiment has turned cautious as AI developments from Anthropic and other competitors demonstrate the technology's disruptive potential. Anthropic's launch of plug-ins for its Claude Cowork agent triggered widespread selling across software stocks, rattling industries from legal services to wealth management
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. Shares of U.S. brokerages tumbled after wealth management startup Altruist introduced AI-enabled tax planning features, with LPL Financial, Raymond James Financial, and Charles Schwab each dropping at least 7%2
.Shorting Software Stocks Emerges as New AI Trade
Shorting software stocks has become the market's newest expression of the AI trade, according to fund managers tracking the trend. "Any company which collates, aggregates, disseminates software and data as a service are seen as increasingly vulnerable to disruption from AI-driven tools," said Sharon Bell, senior European equity strategist at Goldman Sachs
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. Mark Dowding, chief investment officer at RBC BlueBay Asset Management, noted that "shorting software stocks seems to have emerged as a new expression of the AI trade, with short interest in Software-as-a-Sector at a two-year high"4
.The shift in investor concern over AI extends beyond equity markets into private credit. Business Development Companies (BDCs), which provide a transparent window into the half-trillion-dollar private credit market, have significant exposure to software companies. Enterprise software-as-a-service accounts for roughly one-eighth of their total industry-wide exposure
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. Many private debt funds have as much as 30% sector exposure in the software space, raising concerns about potential reverberations across capital markets4
.OpenAI Seeks Comeback as Rivals Capture Attention
While Anthropic has captured recent headlines, OpenAI is preparing a potential comeback that could shift market dynamics again. The company is looking to raise up to $100 billion in its next funding round, with Nvidia reportedly closing in on a deal to invest $20 billion
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. Microsoft and Amazon are also said to be in talks about investing1
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Source: Bloomberg
"It is very possible, if not likely, that at some point this year OpenAI will have come out with a new model that's recaptured the zeitgeist, reversing the perception that it is lagging," said Brian Barbetta, co-leader of Wellington Management's technology team
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. Stocks connected to OpenAI, including Nvidia, Oracle, Microsoft, CoreWeave, and Advanced Micro Devices, have tumbled 13% this year, while Alphabet-tied stocks are up 21%1
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Hardware Firms and Chipmakers Benefit from Capital Spending Surge
While software business models face scrutiny, hardware firms are experiencing a surge in earnings growth. Europe's chipmakers and semiconductor equipment makers are set for an earnings jump of 21% in 2026, compared with just 7% growth in 2025
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. This contrasts with Europe's software companies, which are expected to see earnings-per-share growth slow to 13% compared with 17% last year5
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Source: Bloomberg
Ambitious capital expenditure plans from Amazon and Google parent Alphabet sent shares of infrastructure firms higher, as increased spending translates into stronger demand for chipmaking and data center equipment
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. Questions over massive AI capital spending have pressured share prices of some of the world's biggest companies, with Microsoft shares down 16% this year and Amazon shares down over 11%2
.Re-Evaluating Company Valuations Creates Opportunities
Some investors see buying opportunities as market volatility creates more attractive valuations. JPMorgan equity strategists recommended investors add exposure to a basket of higher-quality and "AI-resilient" software companies, stating they believe "the balance of risks is increasingly skewed towards a rebound"
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. Not every software firm faces equal risk from AI disruption. Companies operating in payroll, product life cycle management, and cybersecurity are better positioned, while those in communication and collaboration fields face bigger risks5
.The challenge for investors lies in distinguishing between companies with sustainable competitive advantages and those vulnerable to disruption. "In 2026, less is more, and stock picking is about avoiding implosions," noted Michael O'Rourke, chief market strategist at JonesTrading, pointing out that S&P 500 constituents lower on the year were down an average of 10.6%
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. As AI continues to advance rapidly, investors must watch for which companies can adapt their business models and which will struggle to justify their valuations in an AI-driven economy.References
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