Market anxiety deepened overnight as investors reacted to fresh signs that Artificial Intelligence could disrupt traditional software business models.
Shares of Salesforce, Adobe, Infosys, and Wipro fell between 5% and 8%. Gartner dropped 21%, while several smaller software-as-a-service firms declined between 15% and 20%.
On Tuesday, February 4, Wall Street saw heavy selling in Thomson Reuters Corp., CS Disco Inc., Legalzoom.com Inc., and Gartner Inc., with losses of up to 25% in regular trading. Indian IT majors Infosys and Wipro, listed in the US as American Depository Receipts, also fell by up to 7% in overnight trade.
The sell-off followed an announcement by Anthropic, which launched a productivity tool for in-house lawyers. This added to existing fears that AI could weaken demand for traditional software products.
A similar reaction hit videogame stocks last week after Alphabet introduced Project Genie, a tool that can create immersive digital worlds using text or image prompts.
The S&P North American Software Index is now on a 3-week losing streak. It fell 15% in January, marking its worst monthly decline since October 2008.
Brokerage firm Jefferies described the trend as a “SaaSpocalypse” and called the trading pattern “get me out” style selling.
Concerns have spread to private equity as well. Firms such as Arcmont AMC and Hayfin Capital Management have hired consultants to identify “vulnerable” businesses, according to a Bloomberg report. Apollo has cut its software exposure in direct lending funds by nearly 50% in 2025, from about 20% at the start of last year.
The same fears led Piper Sandler to downgrade Adobe Inc., Freshworks Inc., and Vertex Inc..
Software stocks now trade at 23 times estimated earnings, the lowest in about 3 years. Their 14-day RSI is in “Oversold” territory. However, Jonathan Krinsky of BTIG warned recovery will take time. “We have not been fans of software for a while given the deteriorating relative strength that really accelerated” in Q4 last year.
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