The Rout
Software and data stocks took a beating Tuesday. Adobe closed down 7.31%. Salesforce fell 6.85%. Thomson Reuters dropped 15.83%. The trigger: Anthropic's new AI tools that handle legal workflows, the kind Thomson Reuters and similar providers have built businesses around.
The sell-off wasn't limited to legal tech. Travel software (Expedia), consumer legal services (LegalZoom), and private equity firms with software exposure (Ares, Apollo, Blue Owl) all got hit. Markets are repricing the entire software sector based on one company's product release.
What Actually Happened
Anthropic released tools that automate legal document analysis and workflow tasks. For enterprises paying Thomson Reuters or LexisNexis six figures annually, the value proposition is obvious. For investors holding software stocks, the implications are suddenly uncomfortable.
Nvidia's Jensen Huang pushed back on the panic, arguing AI won't replace software tools. JPMorgan noted software stocks are "sentenced before trial." Both points are fair. The question isn't whether AI will eliminate all software, it's which categories face genuine margin pressure versus which are repricing on fear.
The APAC Angle
Australian software plays aren't immune. Atlassian's valuation depends partly on workflow tools that AI could compress. The Australian Financial Review noted the sell-off "spares no one" from Atlassian to Canva to private equity holdings.
For APAC CTOs, this matters less as a stock market story and more as a procurement signal. Legal tech buyers are asking: do we renew Thomson Reuters at full price, or pilot Anthropic for three months? That calculation is happening across categories.
What to Watch
Three things: First, which enterprise software vendors announce AI-native competitors (not just "AI features") in the next 90 days. Second, whether procurement teams actually shift spend or just use AI as negotiating leverage. Third, how quickly incumbents can rebuild product around AI primitives versus trying to bolt AI onto legacy architectures.
The market may be overreacting. History suggests it usually does. But the underlying question is real: if an AI model can do in seconds what a $50,000 annual license used to provide, the pricing conversation changes fundamentally.
We'll see which software categories were genuinely vulnerable and which were just caught in the downdraft. The next two quarters will clarify which is which.