U.S. software stocks tumbled last week, reviving concerns that the AI boom is reshaping markets and undermining long-standing technology business models.
The global selloff followed fears that rapidly advancing AI tools could disrupt traditional software economics, triggering a sharp reassessment of growth expectations.
Pressure intensified after a new legal capability from Anthropic’s Claude model raised existential questions about pricing power and defensibility across software services.
Investors began rotating into value and cyclical sectors such as energy, industrials and consumer staples, signaling waning confidence in tech-led momentum.
Software and services stocks now trail the S&P 500 by nearly 24 percentage points over three months, one of the widest gaps seen in three decades.
Despite a modest rebound, options markets point to continued volatility, with implied swings near recent highs and short interest close to record levels.
Analysts warn the selloff could deepen, though history suggests such extremes sometimes precede capitulation or contrarian entry points, depending on earnings resilience.
