Baby, meet bathwater. Wheat, meet chaff. The scale of Tuesday’s savage sell-off of data analytics and software stocks speaks as much to market jitters over anticipated upheaval as it does to the potential of the specific new AI plug-in that triggered it. Investors brave enough to poke through the wreckage know that the damage AI will actually inflict on these sectors is more nuanced than that initial reaction suggests.
Anthropic is the agent of chaos in this case. The AI start-up’s Claude Cowork platform promises to automate corporate dogsbody tasks including some legal work. Shockwaves spread from Toronto to Sydney as well as the more usual market haunts of New York, London and Frankfurt. Legal and accounting-related suppliers took some of the biggest hits. Thomson Reuters, home of legal database Westlaw, tumbled 16 per cent; legal rival Relx, owner of LexisNexis, dropped 14 per cent.
Like the myriad software suppliers languishing at or near their 52-week lows, database companies had been prized for high levels of customer retention and the resulting sticky recurring revenue. That dependence should weaken — rapidly — as it gets easier for companies to write their own specific software, without the costs of customising and embedding their usual off-the-shelf kit.