Artificial Intelligence Triggers Market Concerns
Wall Street faced a turbulent week as growing fears about artificial intelligence (AI) replacing traditional software tools sparked a broad sell-off in tech and software stocks. The release of powerful new AI tools by Anthropic, a San Francisco-based startup, sent shockwaves through the market, prompting investors to reassess the future viability of many software businesses.
These new tools, offered as open-source plug-ins, allow companies to automate critical functions such as customer support and legal services. Their free availability threatens to undermine existing software providers, particularly those in the software-as-a-service (SaaS) space. As a result, companies like Salesforce, LegalZoom, LexisNexis, and Thomson Reuters saw their stocks drop by as much as 25 percent over the past week.
Investor Anxiety Over AI Spending
Investor sentiment was further shaken by announcements from major tech giants about unprecedented capital expenditures on AI. Amazon revealed plans to invest $200 billion in AI and other large-scale projects in 2026, exceeding analysts’ expectations by $50 billion. The news sent its stock tumbling more than 7 percent. Similarly, Alphabet, Google’s parent company, projected up to $185 billion in spending this year, while Meta forecasted capital expenses reaching $135 billion, largely directed toward AI development.
These massive investments have led some investors to question whether the AI hype is sustainable or if companies are overextending themselves financially in a race to dominate the AI space.
SaaSpocalypse: The Fall of Software Stocks
The release of Anthropic’s plug-ins, capable of replacing many SaaS tools, catalyzed what analysts are calling the “SaaSpocalypse.” Shares of Adobe and Figma, known for their creative design software, also suffered, dropping 9 percent and 17 percent respectively. The fear is that AI will automate many creative and administrative tasks, rendering existing tools and services obsolete.
Sam Altman, CEO of OpenAI, acknowledged this trend during a recent interview, noting that more sell-offs in SaaS stocks are likely as AI continues to evolve. “There have been a number of these big sell-offs of these SaaS stocks over the past few years as these software models have rolled out,” he said. “I expect there will be more.”
Private Credit Markets Also Under Pressure
The impact of AI disruption is not limited to publicly traded companies. Private credit markets, particularly business development companies (B.D.C.s) that lend heavily to software firms, are also feeling the strain. According to Barclays analysts, about half of the software debt held by B.D.C.s — approximately $45 billion — is not due until 2030 or later. This long horizon increases the risk that these companies could be overtaken by AI innovations before they can repay their loans.
An exchange-traded fund managed by VanEck, which holds many major B.D.C.s, has dropped about 5 percent this year and more than 20 percent over the past 12 months. Even strong earnings reports from firms like Ares Management and Blue Owl Capital failed to reassure investors. Shares of Ares have fallen over 20 percent in 2026, while Blue Owl is down more than 16 percent.
Blue Owl’s co-chief executive, Marc Lipschultz, pushed back against the notion that AI poses a threat to their lending business. “We don’t have red flags and, point of fact, we don’t have yellow flags. We actually have largely green flags,” he stated during an analyst call. Nevertheless, concerns persist about the long-term viability of software companies that form the core of private credit portfolios.
Broader Economic Shifts and Sector Rotation
Outside the technology sector, AI’s influence is being felt in hardware and chip markets. Qualcomm, a leading microprocessor manufacturer, reported uncertainty about future demand for its chips due to the rising costs of random-access memory (RAM), a key component for AI systems. Qualcomm shares are down roughly 20 percent this year.
Retail investors are also reacting to the shifting landscape. Bitcoin, often traded alongside speculative tech stocks, dropped below $60,000 — its lowest level since October 2024 — before rebounding slightly. Treasury Secretary Scott Bessent stated during a congressional hearing that the government could not intervene by ordering banks to purchase Bitcoin to stabilize its price.
As speculative investments falter, investors are redirecting funds toward more traditional sectors. Energy, consumer staples, and materials have all gained more than 10 percent this year, while tech has lagged. “After years of tech-driven market leadership, the balance of power is shifting as investors rotate toward traditional ‘old economy’ sectors,” said Angelo Kourkafas, a strategist at Edward Jones.
This article is inspired by content from Original Source. It has been rephrased for originality. Images are credited to the original source.