Reviewed by Gotrade Internal Analyst
Gotrade News - Software stocks took a nosedive during Wednesday's trading session (Feb 4). The selloff was fueled by growing fears that artificial intelligence is starting to eat into traditional business models.
Key Takeaways:
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Anthropic’s new automation tool sparked fears of disruption across software stocks.
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Tech giants like Microsoft and Nvidia saw significant price corrections.
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Analysts believe the reaction is overblown but warn against "catching a falling knife."
Tech giants like Microsoft slumped 3.7% this week. This negative sentiment dragged down Salesforce and Adobe, which both saw significant declines.
Steve Sosnick from Interactive Brokers noted a clear "get me out" panic driving investors. He believes the market is now scrambling to figure out exactly who is getting disrupted.
The main trigger was the launch of a new legal automation tool by startup Anthropic. This innovation is seen as a potential replacement for conventional information and analytics services.
This uncertainty even spilled over to chipmakers, previously the market's darlings. Nvidia shares dropped 9%, while Advanced Micro Devices (AMD) took a brutal 15% hit since the start of the week.
Bailard’s Dave Harrison Smith sees a "sell-first" reaction that isn't really looking at the nuance. However, he warns that trying to time the bottom right now is risky business.
Morningstar analyst Dan Romanoff believes the fundamentals of software companies actually still look solid. He argues that the market's fear regarding the AI threat is currently overblown.
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Reference:
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Morning Star, What to Know About the Software Stock Selloff. Accessed on February 5, 2026
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