K Kritivasan, CEO of Tata Consultancy Services, has pushed back against the AI panic sweeping the world’s software stocks, saying the idea that large-scale language models will simply replace enterprise software is “outrageous.”Speaking to Bloomberg, Kritivasan candidly said: “Will the entire value chain be replaced by LLM?” “That’s not going to happen. You can’t just throw Anthropic in there,” he said. His argument is that banks, retailers and telcos are using complex systems that are decades old and won’t be undone by chatbot upgrades.He’s not alone in his skepticism. Nvidia CEO Jensen Huang called the software sale “the most illogical thing in the world.” Arm CEO Rene Haas dismissed it as “microhysteria.” And Steven Sinofsky, the former Microsoft executive who developed Windows 7 and 8, was even more blunt, calling the whole software death story “nonsense.”
A single Anthropic plugin helped spark an $830 billion wipeout in software stocks
The pullback does not slow down the sell button. What traders are calling the “SaaSpocalypse,” largely sparked by Anthropic’s announcement of an industry-specific plug-in for its Claude Cowork tool in late January, wiped out about $830 billion from the S&P 500 Software and Services Index in just six trading sessions. Thomson Reuters cratered nearly 16% in one session. DocuSign fell 11%. Salesforce, Adobe, and ServiceNow all fell about 7%. The Goldman Sachs Basket, which tracks U.S. software stocks, has fallen about 25% from its September peak and is at its lowest since April.The collateral damage extends beyond SaaS. Cybersecurity stocks fell after Anthropic announced another code security scanning tool. CrowdStrike fell 8%, Octa fell more than 9%, and the Global X Cybersecurity ETF closed at its lowest level since November 2023. The low point for IBM came after Anthropic claimed it could automate COBOL modernization with Claude code, causing the company’s stock to plummet 13.2%, the biggest one-day decline in 25 years. This single announcement wiped out about $40 billion from IBM’s market capitalization.
Wall Street is driving up prices across the software sector, betting that AI will shrink the addressable market.
The fear isn’t really about one plugin or one tool. Wholesale price resale. Anthropic’s legal plugin is centered around a structured series of prompts, which was enough to send investors fleeing Thomson Reuters, RELX, and LegalZoom in one afternoon. The iShares Expanded High-Tech Software Sector ETF is currently down more than 23% year-to-date and on track for its worst quarterly decline since the 2008 financial crisis. The Indian IT industry was no different, with Infosys’ ADR down 5.5% and Wipro down nearly 5%.
The big question is: Will AI hollow out software companies, or will it ultimately make them more valuable?
A credible counter-argument has been formed. JPMorgan’s Mark Murphy said it was an “illogical leap” to assume that a single LLM plug-in could replace a layer of mission-critical enterprise software. SAP CEO Christian Klein claims his company is aggressively winning deals thanks to AI. And Zoho founder Sridhar Venbu offered perhaps the most astute observation. He argued that SaaS was already “ripe for consolidation” long before AI, bloated by an industry that spent more money on sales and marketing than on actual engineering.But Wall Street doesn’t care about nuance. Blue Whale Growth Fund’s CIO Stephen Yiu summed it up: “This is the year that companies will decide whether they will be winners or victims of AI, and the key skill is to avoid the losers.”
