Key Points

For several months, the global IT sector has been under persistent pressure due to concerns that artificial intelligence will impact future business growth. The immediate catalyst for the sharp stock decline was AI company Anthropic's launch of a new legal tool for its Cowork product. An engineer performs statistical analysis report work. A conceptual diagram of digital technology and artificial intelligence (AI). An engineer performs statistical analysis report work. A conceptual diagram of digital technology and artificial intelligence (AI).

Fears from Wall Street regarding AI-driven industry disruption impacting software companies spread to Asia on Wednesday, with Asia-Pacific technology stocks falling sharply in line with overnight losses from their U.S. counterparts. In Asian markets, Japanese software stocks led the decline. Japan's major IT services and systems integrator TIS plunged nearly 16%; Trend Micro dropped over 7%, and NS Solutions fell more than 7%. Indian IT company shares also moved lower, with the Indian Nifty IT index tumbling 6.7%. Leading IT firm Tata Consultancy Services (TCS) fell 6.6%, Infosys dropped 8%, and HCL Technologies declined 5.3%. Just a day earlier, Indian IT companies had been market leaders in gains following India's announcement of a trade agreement with the United States. Chinese software stocks were also sold off. Kingdee International Software Group's share price plummeted over 12%; cloud services giant TENCENT fell 3.1%, Alibaba dropped 0.6%, and Baidu declined more than 2%. Edward Yardeni, President of Yardeni Research, stated, "AI is making competition in the tech industry increasingly intense." He pointed out, "Software stocks were hit hard because Anthropic introduced new tools for its Cowork product. It is still too early to judge the practical value of these new tools, but investors have already chosen to lower the valuation multiples for software stocks." Software Stocks Under Pressure for Second Consecutive Day Software companies, once awarded high valuations due to sticky subscriptions and stable renewals, now face a severe test—AI promises to automate workflows, compress pricing power, and lower market entry barriers for new competitors. Vey-Sern Ling, Senior Equity Advisor at UBP, said, "For a sector re-rating to occur, companies must prove that AI can be a growth accelerator, not just a competitive threat. With investors cautious, this process may take longer than before." Ling mentioned that UBP prefers infrastructure software with lower AI disruption risk and the cybersecurity sector, which possesses pricing power and where AI might create upselling opportunities. In the overnight U.S. market, ServiceNow's stock plunged nearly 7%, expanding its year-to-date decline to 28%; Salesforce also fell about 7%, bringing its 2026 cumulative loss to nearly 26%; Intuit, the parent company of TurboTax, dropped almost 11%, with its year-to-date decline exceeding 34%. Dragged down by these stocks, the tech-heavy Nasdaq Composite Index fell 1.4% on Tuesday. In European markets, software-related stocks also fell sharply on Tuesday. The Europe Stoxx Software & Computer Services index plunged over 5%, UK information analytics company RELX dropped more than 14%, and French IT giant Capgemini closed down 9.2%.