‘No Reasons to Own’: Software Stocks Sink on Fear of New AI Tool

Core Viewpoint - The software sector is experiencing its worst start to the year since 2022, with significant declines in stock prices driven by fears of disruption from new AI tools [1][3]. Group 1: Market Performance - Software-as-a-service stocks tracked by Morgan Stanley are down 15% year-to-date, following an 11% drop in 2025 [3]. - Intuit Inc. saw a 16% decline, marking its worst performance since 2022, while Adobe Inc. and Salesforce Inc. both fell over 11% [2]. Group 2: Impact of AI Developments - The release of Anthropic's new AI tool has heightened concerns about competition and disruption in the software market [2][4]. - The tool, capable of creating spreadsheets and drafting reports, exemplifies the rapid advancements in AI that investors fear [4][5]. Group 3: Investor Sentiment - Many investors are reluctant to invest in software stocks, regardless of their low valuations, due to a perceived lack of catalysts for price recovery [6]. - The current selloff has widened the performance gap between software companies and other tech sectors, overshadowing their historically attractive profit margins and recurring revenue [7]. Group 4: Company-Specific Developments - Companies like ServiceNow Inc. are trading at their lowest levels in years, while the Nasdaq 100 Index approaches record highs [8]. - Salesforce's AI product, Agentforce, has not significantly impacted revenue, and Adobe has not updated key AI metrics in its recent earnings report [8][9].