Enterprise software stocks entered their seventh consecutive session of steep declines on February 5 as panic over AI-driven disruption intensified, with the WisdomTree Cloud Computing Fund plummeting approximately 20 percent year-to-date and major companies experiencing losses exceeding 40 percent. The selloff—traders are calling it the "SaaSpocalypse"—accelerated after Anthropic released 11 new plugins for its Claude Cowork productivity tool on February 1, including capabilities for legal research, contract drafting, and marketing automation that directly threaten traditional software business models.
HubSpot has fallen 39 percent in 2026 following a 42 percent decline in 2025, while Figma dropped 40 percent, Atlassian declined 35 percent, and Shopify shed 29 percent. ServiceNow tumbled nearly 7 percent on Tuesday alone, pushing year-to-date losses to 28 percent, while Salesforce dropped approximately 7 percent to bring 2026 declines to nearly 26 percent. Intuit plunged almost 11 percent and now sits more than 34 percent below its year-end close.
The Anthropic Catalyst That Broke Markets
The immediate trigger for Tuesday's historic selloff was Anthropic's Friday announcement of Claude Cowork plugins enabling automated tasks across legal, sales, marketing, and data analysis workflows. The legal industry plugin proved particularly devastating—Thomson Reuters, parent company of Reuters News, suffered a record 16 percent single-day plunge on fears that AI could threaten its core legal division. London Stock Exchange Group, which operates a major data analytics business, dropped 13 percent. Legal software providers CS Disco sank 12 percent while LegalZoom plummeted 20 percent.
British legal information giant RELX fell over 14 percent on Tuesday before paring losses to 3 percent Wednesday morning, while Netherlands-based Wolters Kluwer dropped more than 12 percent initially. The panic extended beyond legal technology as investors recognized that Claude Cowork's capabilities could automate routine tasks across multiple enterprise software categories that have underpinned the industry's pricing power for decades.
Jeffrey Favuzza, who works on the equity trading desk at Jefferies, described the market sentiment: "We call it the 'SaaSpocalypse,' an apocalypse for software-as-a-service stocks. The draconian view is that software will be the next print media or department stores in terms of their prospects."
Global Contagion Spreads Across Markets
The software rout went global on Wednesday as Asian markets opened. Japanese software firms led regional declines, with TIS—a major information technology services provider—plunging nearly 16 percent. Trend Micro lost over 7 percent while NS Solutions declined more than 7 percent. NEC, Nomura Research Institute, and Fujitsu sank between 8 percent and 11 percent, dragging the Nikkei benchmark lower.
India's Nifty IT index dropped 5.8 percent in what became its worst session in nearly six years. Major IT exporters Tata Consultancy Services and Infosys fell 7 percent and 7.3 percent respectively, while HCL declined 4.3 percent. The selloff came just one day after Indian IT companies surged following announcement of a trade deal with the United States, illustrating how quickly AI disruption fears overwhelmed other positive catalysts.
Chinese software companies joined the decline. Kingdee International Software plunged more than 12 percent, cloud giant Tencent fell 4 percent, Alibaba lost nearly 1 percent, and Baidu dropped 3 percent. Cloud-based accounting software maker Xero slid as much as 15 percent in Sydney trading, marking its steepest decline since March 2020.
The S&P 500 Software Index Enters Crisis Territory
The S&P North American software index entered a three-week losing streak that delivered a 15 percent drop in January—its biggest monthly decline since October 2008 during the financial crisis. By Thursday, the S&P 500 software and services index had fallen 2.8 percent for a seventh consecutive session and was on track to lose more than $950 billion in market value since January 28.
The tech-heavy Nasdaq Composite slid 1.4 percent on Tuesday as software concerns contaminated broader technology sentiment. Even Nvidia, the primary beneficiary of AI infrastructure spending, extended losses to trade 0.3 percent lower in premarket Wednesday despite CEO Jensen Huang calling fears that AI would replace software "illogical."
Video game stocks suffered collateral damage after Alphabet began rolling out Project Genie, which can generate immersive gaming worlds from text or image prompts, raising concerns about AI disruption extending beyond traditional enterprise software into creative industries.
Industry Leaders Push Back Against Disruption Narrative
Box CEO Aaron Levie attempted to counter the pessimism, telling CNBC on Wednesday that "this is the most exciting moment we've ever had" in the company's 20-year history. Wall Street disagreed—Box stock dropped 17 percent in 2026 after experiencing its steepest monthly decline since 2023. Levie described "cognitive dissonance" within the industry as companies recognize AI's power to enhance products while grappling with investor fears of existential threats.
ServiceNow CEO Bill McDermott stated after healthy quarterly results that his products serve "as the semantic layer that makes AI ubiquitous in the enterprise," arguing they cannot be replaced by AI agents. Analysts at Stifel wrote that despite broader disruption fears, "no partner cited near-term headcount reductions or seat disruption related to AI" when examining HubSpot's business fundamentals.
Byron Deeter, a longtime cloud software investor at Bessemer Venture Partners, took a contrarian stance: "Chaos creates opportunity! A lot of money is about to be made for those who have the conviction to place the right private and public software bets right now."
Structural Questions About AI's Impact on Software Economics
The selloff reflects deeper questions about whether AI fundamentally disrupts software business models built on recurring revenue subscriptions. The generative AI boom, kickstarted by ChatGPT over three years ago, has rapidly pushed into the business realm with tools that can create applications, websites, and digital products in seconds with text prompts.
J.P. Morgan analyst Toby Ogg noted: "We are now in an environment where the sector isn't just guilty until proven innocent but is now being sentenced before trial. Our sense from investor discussions is that general appetite to step in remains generally low," citing risks including competition from AI-native firms and clients building their own solutions in-house.
Salesforce CEO Marc Benioff revealed in fall 2025 that the company reduced headcount from 9,000 to approximately 5,000 employees because "I need less heads" due to AI capabilities. Challenger, Gray & Christmas reported that around 55,000 U.S. layoffs in 2025 cited AI as a factor, with more expected throughout 2026 as companies replace human workers with cheaper AI substitutes.
Alphabet Spending Announcement Amplifies Concerns
The software crisis intensified Thursday after Alphabet announced plans to spend $175 billion to $185 billion on AI capital expenditures in 2026—nearly double its 2025 spending. The announcement stoked concerns about whether massive AI investments would deliver proportional returns while accelerating disruption of traditional software companies.
Ed Yardeni, president of Yardeni Research, summarized the new competitive reality: "AI has turned technology into an even more competitive sport."
Market participants attribute the violent moves to leveraged investors being forced to rapidly unwind positions as relative value bets go wrong. Market volatility has surged across equities, commodities, and digital assets, with precious metals gold and silver experiencing historic routs and Bitcoin slipping below $70,000 for the first time.
For now, the market has delivered its verdict: traditional enterprise software faces an existential reckoning, and investors are fleeing before establishing which companies will adapt successfully and which will become the digital economy's equivalent of print media or department stores.
