BY COMFORT OGBONNA
A sharp selloff in global software stocks deepened for a second consecutive day on Wednesday as investors grew increasingly uneasy about how rapid advances in artificial intelligence could threaten the long-term viability of many established business models.
European software, data analytics and professional services companies extended losses, tracking declines seen across Asia and other global markets. The renewed pressure followed the unveiling of a new legal-focused artificial intelligence model from Anthropic, which reinforced concerns that AI could directly encroach on services traditionally provided by software and information firms, particularly those seen as most exposed to automation and generative technologies.
In Europe, shares of Britain’s RELX and the Netherlands-based Wolters Kluwer, both major providers of analytics and data services to the legal sector, fell to fresh lows, dropping nearly 3% each in morning trading. London Stock Exchange Group shares plunged a further 6%, compounding a steep decline of almost 13% a day earlier and underscoring the scale of investor anxiety surrounding data-driven businesses.
The weakness was not confined to Europe. Indian IT exporters also suffered sharp losses, while Japanese software and systems developers such as NEC, Nomura Research and Fujitsu slid between 7% and 11%. The selloff weighed heavily on Japan’s Nikkei benchmark, which moved lower overnight as technology stocks bore the brunt of the pressure.
The broad retreat comes amid growing fears that a technology-driven market bubble may be at risk of bursting, raising potential concerns for financial stability. Analysts say the focus has shifted away from near-term earnings and toward deeper questions about long-term growth and relevance in an AI-dominated landscape.
JP Morgan analyst Toby Ogg said investors are increasingly worried about assumptions that underpin growth far beyond the typical three-year forecasting window. He noted that sentiment toward the sector has turned sharply negative, with investors reluctant to step in despite steep share price declines. According to Ogg, software companies now face multiple overlapping risks, including competition from AI-native firms and customers opting to build their own solutions in-house rather than relying on external vendors.
Advertising groups, another segment seen as particularly vulnerable to AI disruption, also remained under heavy pressure. France’s Publicis fell nearly 5%, while Britain’s WPP dropped more than 3%, reflecting concerns that generative AI could reshape advertising creation, targeting and analytics at a faster pace than previously expected.
Europe’s largest software company, SAP, saw its shares slide more than 3%, extending recent weakness after a disappointing cloud revenue outlook erased roughly $40 billion from its market value last week. The decline highlighted how even market leaders are not immune to investor fears about slowing growth and intensifying competition in an AI-driven environment.
The contrast with other parts of the technology market has been stark. Chipmakers such as Nvidia and major AI-focused cloud players like Microsoft have helped propel U.S. equities to record highs, benefiting directly from soaring demand for AI infrastructure. However, as enthusiasm for AI spreads across global markets, policymakers and regulators including the International Monetary Fund and the Bank of England have warned that excessive optimism could fuel a dangerous bubble.
Ben Barringer, head of technology research at Quilter Cheviot, said the current turmoil reflects a pivotal moment for software and IT services companies. He noted that while innovation inevitably brings disruption, the pace and scale of AI advances have created significant uncertainty about what future business models will look like. With limited clarity on the true capabilities of emerging AI agents, many investors are choosing to avoid the software sector altogether, accelerating the selloff and leaving few places for defensive positioning within the industry.
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