Software stocks fall as fear of AI disruption is back in full force

By Hannah Pedone

A new release from Anthropic's AI agent Claude has revived fears that software will no longer be needed to complete certain tasks

Software stocks were dropping Tuesday amid revived fears that AI will make some software uses obsolete.

Shares of software companies fell sharply on Tuesday after a release from a major artificial-intelligence player revived investor fears that some of those companies' business models could become obsolete.

The iShares Expanded Tech-Software Sector ETF IGV, a proxy for software stocks, dropped 4.3% on the day to put the exchange-traded fund in negative territory this month for the first time.

Anthropic announced a new update on Monday that allows its AI agent Claude to utilize a user's computer to complete tasks. Anthropic product drops have rocked the software sector this year, contributing to a wider selloff in the industry.

But the sector had seen some life to start this month. After the iShares software ETF tumbled 14.6% in January - its worst monthly performance since it sank 23% in October 2008 - and fell another 9.7% in February, it surged 7.9% during the first week of March before peaking.

Yet Tuesday's selloff showed how quickly any sense of calm in the sector can fade in the age of AI.

Mizuho Securities analyst Daniel O'Regan said in an email that software stocks were getting hit as Claude's "expanded 'computer-use' capabilities revive fears that AI agents could eventually bypass traditional software seats, pressuring long-term pricing power."

That's the case "even if the near-term fundamentals haven't changed," he added.

Circle Internet Group (CRCL), Rapid7 (RPD), SentinelOne (S) and HubSpot (HUBS) were the four worst performers in the iShares software ETF on Tuesday. Shares of Circle were down 20.1%, Rapid7 lost 9.8%, SentinelOne shed 9.3% and HubSpot fell 9.2%.

O'Regan noted, however, that the steep selloff in Circle shares may have had more to do with a new rule prohibiting platforms from offering yield on stablecoins.

Shares of UiPath (PATH), Atlassian (TEAM), Tenable Holdings (TENB), Intapp (INTA), Mara Holdings (MARA) and Zeta Global Holdings (ZETA) were all also among the losers on Tuesday.

Anthropic's new tool allows Claude to open files, use a browser and run developer tools automatically. And when Claude "doesn't have access to the tools it needs," it can "point, click and navigate what's on your screen" to perform tasks, according to a blog post.

Users can also message Claude from a phone and ask it to complete tasks. The new Anthropic feature can run locally on a device, like the open-source agent OpenClaw.

See also: Anthropic ratchets up its Pentagon battle as it sues the government

O'Regan wrote in a Tuesday trading-desk note that the new product drop was just one reason for the software selloff on Tuesday. But more broadly, he believes the sector is under pressure "less because of fundamentals and more because of flows," he wrote in an email.

"Basket trading, custom indices and ETFs are driving indiscriminate selling, pulling down everything tied to the sector regardless of business quality," he said.

Read more: Anthropic's meteoric rise shocked the market - but the AI crown remains up for grabs

The iShares software ETF has tumbled 23.5% so far this year, while the State Street Technology Select Sector SPDR ETF XLK has lost 5.4% and the S&P 500 SPX has declined 4.2%.

-Hannah Pedone

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03-24-26 1809ET