US software stocks fall as Anthropic's new AI model revives disruption fears

U.S. software shares tumbled on Thursday after Anthropic held back the wide release of a powerful AI model over concerns it could expose hidden cybersecurity vulnerabilities, deepening investor fears about the threat to traditional software firms.

Anthropic said earlier this week it would only allow a ‌group of around ⁠40 ⁠companies, including Microsoft and Google, access to its "Claude Mythos" model because it ​has already found thousands of vulnerabilities, including some in every major operating system ​and web browser.

"If Mythos is that strong and that powerful and it's exposing these vulnerabilities that have been around for ​years, it just shows one, the weakness ⁠of the ‌current software that's out there and two, ​that AI ​is still making incredible progress versus legacy software ⁠companies," said Michael O'Rourke, chief market strategist at JonesTrading.


The ​S&P 500 Software and Services Index is ​down nearly 26% this year, including Thursday's 3.1% drop, on worries that rapid progress in AI could hit SaaS (software-as-a-service) companies that sell subscription-based products to clients.

Cybersecurity firms Cloudflare, Okta, CrowdStrike and SentinelOne dropped between 4.7% and 7.7% in morning trade.

Zscaler was ‌among the biggest decliners on the S&P 500, down 8.6%. Brokerage BTIG downgraded the stock to "neutral" ​from "buy", citing ​concerns over demand ⁠and potential competition.

"We're getting back to being concerned about the prior software-specific concerns stemming from AI and private credit that are coming ​back to the fore," said Steve Sosnick, chief market analyst at Interactive Brokers.

Enterprise software developer Atlassian, human resources software provider Workday, Photoshop software maker Adobe, enterprise cloud firm Salesforce and TurboTax-parent Intuit dropped between 3.7% and 6.8%.