Global software stocks slid for a second straight session on Wednesday as investors reacted to growing concerns that artificial intelligence could disrupt long-standing software business models faster than companies can adapt. Shares of major enterprise software firms including ServiceNow, Salesforce, and Intuit fell again in premarket U.S. trading, extending sharp losses from the prior day that had already dragged down global tech indices.
The selloff followed a bruising Tuesday for software names. ServiceNow dropped nearly 7%, pushing its year-to-date losses to about 28%, while Salesforce also fell roughly 7%, leaving it down almost 26% for the year. Intuit posted one of the steepest declines, sliding close to 11% and bringing its year-to-date losses above 34%. Those moves helped send the Nasdaq Composite down 1.4% during the session.
Pressure was not limited to U.S. markets. In Europe, the Stoxx Europe Software and Computer Services index sank more than 5% on Tuesday, led by steep declines in companies such as RELX, which lost over 14%, and Capgemini, which closed down more than 9%. Losses continued into Wednesday, with the index falling another 1.9% in early trading. Shares of TomTom dropped more than 12%, while Trustpilot and Atoss both fell sharply.
Asian markets showed similar stress. Japanese software and IT firms led regional declines during Wednesday’s session, with TIS plunging nearly 16% and Trend Micro and NS Solutions each down more than 7%. In India, the Nifty IT index slid 5.8%, erasing gains from the previous day, as Tata Consultancy Services, Infosys, and HCL all posted significant losses.
Investors appear to be reassessing how AI will affect the economics of software companies that have long been valued for predictable subscription revenue and high renewal rates. Rather than simply boosting productivity, AI tools are increasingly viewed as a source of competitive pressure that could automate workflows, compress pricing, and lower barriers to entry for new competitors. That shift has led markets to cut valuation multiples across the sector.
Ed Yardeni, president of Yardeni Research, said the latest wave of selling followed new AI product announcements that rattled investor confidence. “AI has turned technology into an even more competitive sport,” Yardeni said, pointing specifically to recent tools rolled out by Anthropic for its Cowork product. While it remains unclear how widely adopted or impactful those tools will be, he said investors reacted by reassessing the earnings durability of software companies.
Some analysts argue the market is now drawing sharper distinctions within the software sector. Vey-Sern Ling, a senior equity advisor at UBP, said investors are likely to favor areas where AI poses less risk of disruption. Infrastructure software and cybersecurity companies, he noted, may be better positioned, as they often retain pricing power and can potentially use AI to upsell existing customers rather than undercut their own products.
For now, the selloff reflects skepticism rather than a definitive judgment on AI’s long-term value. Investors appear less willing to assume that AI spending will translate quickly into revenue growth, particularly as implementation costs and competitive pressures become more visible. Until software companies can clearly demonstrate that AI is driving sustainable growth — rather than accelerating commoditization — market volatility in the sector is likely to persist.
This analysis is based on reporting from CNBC.
Image courtesy of Unsplash.
This article was generated with AI assistance and reviewed for accuracy and quality.
