Sell first, ask questions later! Is the “software panic theory” overblown? Wall Street always overestimates the abilities of tech companies.
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Wall Street's panic-driven selloff of software companies is replaying an old script in the tech industry.
On Thursday, Bloomberg columnist Dave Lee said in his latest article that just four paragraphs of text on Anthropic PBC's website triggered a $300 billion stock market selloff, but such a reaction may be exaggerated. Nvidia CEO Jensen Huang called this assumption "the least logical," and history shows the market always tends to overestimate the ability of tech giants to disrupt specialized fields.
Last week, Anthropic quietly released a plugin for its Cowork feature, claiming the tool can "speed up contract review, NDA classification, and compliance workflows for internal legal teams." This news became the fuse for a broad selloff in professional software stocks on Tuesday. Jefferies analysts called it the "SaaS doomsday," as the market fears professional software companies are vulnerable to all-in-one AI tools— even if they're not eliminated, their profit margins may suffer severely.
Dave believes both assumptions are premature. General AI is indeed growing stronger, but that doesn't automatically mean less demand for specialized software. Anthropic's AI can browse legal documents, but it doesn't address the risk management, workflow, accountability, and integration features built into tools designed specifically for these tasks. When issues arise, enterprises expect dedicated support teams to fix them promptly.
More importantly, Anthropic trying to replace professional software companies is self-defeating; turning these companies into customers is the faster and more sustainable path to profits. U.K.'s Relx and Ireland's Experian, as well as SAP, ServiceNow, and Synopsys— all hit hard in the current selloff— are Anthropic's potential customers, not competitors.
History Always Repeats Itself
Dave believes traders habitually overestimate tech companies' ability to solve particularly difficult and specialized problems.
When Amazon announced its entry into healthcare, healthcare stocks plunged; when the company announced plans to disrupt the grocery industry, grocery stocks responded in kind; when Zuckerberg announced the launch of Facebook Dating, Match Group's market value evaporated by 20%.
Similar scenes unfolded in gaming. When Google unveiled Project Genie—an AI tool for "real-time generation" of interactive experiences—gaming companies saw about $40 billion wiped off their market value. TakeTwo Interactive Software shares have dropped nearly 8% since then.
But to think Google's generative tool threatens the creative geniuses behind Grand Theft Auto is as absurd as firing Spielberg because someone invented a new camera.
Market Lacks Poise in the Age of AI
Professional software companies are integrating AI as a feature, not as the main character. Design tool Canva has integrated AI as a feature, while programming platform Replit's all-in-one app development platform is more comprehensive than Anthropic's Claude Code—though it uses Anthropic's model under the hood.
J.P. Morgan analyst Tony Ogg says software stocks are being "sentenced without a trial." Will the software industry be disrupted? Without a doubt—but the rise of the internet and mobile computing has disrupted the industry before, ultimately creating both winners and losers. AI may bring bigger disruptions, but that doesn't mean knee-jerk reactions suddenly become rational.
Dave thinks that whether it's SaaS, video games, or other industries affected by AI, the fundamental problem is this: Wall Street lacks the psychological composure to handle the AI era. When the market thinks there's bad news, it panics; when sentiment is positive, it's overly exuberant. This is partly due to hype from AI companies themselves, but even the strongest AI supporters don't believe predictions of the software industry's doom are reasonable.
According to Bloomberg, Jensen Huang responded to the selloff by saying: "Would you use a screwdriver, or invent a new screwdriver?" The analogy highlights the core issue: AI tools are more likely to enhance, rather than replace, specialized software.
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