US tech stocks fell sharply on Tuesday as fresh concerns about the impact of AI on software businesses hit Wall Street.
The tech-heavy Nasdaq Composite fell 1.4 percent, while the broader S&P 500 was down 0.8 percent. The market’s decline came on the heels of a big drop for many analytics groups after AI company Anthropic launched a productivity tool for its cloud cowork platform that can help automate legal work.
Analytics groups Gartner and S&P Global fell 21 percent and 11 percent, respectively, while Intuit and Equifax both fell more than 10 percent. Moody’s declined 9 percent and FactSet declined 11 percent.
The JPMorgan index tracking U.S. software stocks fell 7 percent, bringing its losses this year to 18 percent.
“Software is in steep decline,” said Charlie McElligott at Nomura.
“The irony, the funny thing, is that after Oracle got funding yesterday, everyone was breathing a sigh of relief on the AI hyperscaler business,” he said, referring to the software group’s multiple-subscribed $25 billion bond offering on Monday. “The second-order effects of AI rollouts are being felt today.”
Index heavyweights were caught in Tuesday’s selloff, with chip maker Nvidia falling 2.8 percent and Microsoft falling 2.9 percent, continuing its recent decline. Oracle fell 3.4 percent.
“All the software players are customers of hyperscalers like Amazon, Microsoft and Alphabet,” said Mike O’Rourke at Jones Trading. “If the people who have to buy computing power are being disrupted, that’s bad for hyperscalers too.”
“If there is legal disruption (from Anthropic’s new tool), then advisory and financial services may also be disrupted,” he said.
AMD, an AI chip rival to Nvidia, fell nearly 5 percent in the market on Tuesday, despite the company beating Wall Street estimates on last-quarter revenue and sales of $9.8 billion for the current quarter.
Chief Executive Lisa Su said the company is “entering 2026 with strong momentum” due to the “rapid expansion” of its data center business. A deal with OpenAI last year established the start-up as the first customer for AMD’s upcoming MI400 AI chips, which compete with Nvidia.
But investors are worried about the skyrocketing cost of memory chips driven by data center demand, which is hurting the margins of big US tech companies like AMD, Intel and Apple.
According to Jeremy Abelson of Irving Investors, many investors have reduced their positions in software stocks in recent months as concerns have grown over the risks of AI in the sector, making them easily scared off by new developments.
“Positioning is at a multi-year low and risk is at a multi-year high,” Abelson said. “I’ve covered software for a long time and I’ve rarely seen a day when almost everything dropped 4 to 15 percent.”
Private equity groups, many of which have invested in software in recent years, have also declined sharply. Like KKR, Ares Management fell 10 per cent and Apollo fell 4.8 per cent.
Others attributed the scale of Tuesday’s moves on herd mentality, with Steven Gray, chief investment officer at Gray Value Management, pointing to the “impossible-to-predict impact of AI” that drove the shares higher.
Tuesday’s moves were reminiscent of the sharp market selloff last January that was triggered by the advances of Chinese AI start-up DeepSeek, whose emergence wiped hundreds of billions of dollars off the value of major US tech stocks.
Sectors including transportation and consumer, which are considered relatively immune to AI disruption, led the way in software declines on Tuesday.
In London, information provider Relx alone suffered a hit of more than £6bn.
Relx fell 14.4 percent on Tuesday, reversing the fortunes of one of the best-performing stocks in recent years and the company widely considered one of the UK’s brightest hopes for AI success. Relx owns LexisNexis, the leading legal information and analytics platform.
Shares of rival publishers and analysis groups that support legal services also fell sharply, with Wolters Kluwer down 12.7 percent on Euronext in Amsterdam.
Anthropic’s new legal tool – which promises to automate contract review, compliance workflows and legal briefings – was among the tools launched to automate specific tasks within a company that also cover marketing and customer support.
Shares in European advertising companies also fell sharply on Tuesday, with Publicis down 9 percent and WPP down nearly 12 percent. Omnicom in the US fell more than 11 percent.
Traditional media companies like Relx have reinvented themselves as data-driven analytics businesses, with the expectation that they will be among Europe’s AI winners given their access to proprietary data and research.
Relax was among Britain’s top 10 most valuable companies last year, just above Barclays, but investor fears over US tech companies rolling out AI tools specifically to corporate clients have recently begun to weigh on its share price.
LSEG has struck a deal with Anthropic to license some of its financial markets data to the cloud.
The group also earns substantial revenue from data and news competing workspaces from Bloomberg’s ubiquitous terminals. Workspace has over 350,000 users between portfolio managers, investment banks and wealth advisors.
LSEG shares fell 12.8 percent, its worst one-day performance in five years.
Additional reporting by Michael Acton
