By Medha Singh and Saqib Iqbal Ahmed
Feb 5 (Reuters) – Shares of U.S. software and data services companies continued their slide on Thursday for a seventh straight session as investors worried that fast-advancing artificial intelligence tools could upend the sector.
The S&P 500 software and services index fell 4.6% after losing about $1 trillion in market value since Jan. 28, in a selloff dubbed “software mageddon.”
Some of the big tech names most affected by the rout included ServiceNow, which fell 7.6%, Salesforce, which fell 4.7%, and Microsoft, which fell 5%.
“I would classify this as a ‘sell everything’ mentality at this point,” said Dave Harrison Smith, chief investment officer and head of technology investing at asset management firm Bailard.
Canada-based Thomson Reuters, which suffered a record one-day decline earlier this week after investors raised concerns that a new plug-in from Anthropic’s Claude could disrupt its legal business, fell 5.6% despite raising its dividend and reporting fourth-quarter results largely in line with expectations.
The company, which owns legal database Westlaw and news agency Reuters, said it was seeing tangible benefits from AI investments.
“The uncertainty surrounding AI’s ultimate impact means that earnings results will be important signals of business resilience in the near term, but in many cases insufficient to counter long-term downside risk,” said Ben Snider, Goldman Sachs’ chief U.S. equity strategist.
That uncertainty has also kept dip buyers at bay.
“There has been no dip buying… but we are reaching an inflection point,” said Nick Giorgi, chief equity strategist at Alpine Macro.
On Thursday, the S&P 500 software and services index was trading about 21% below its 200-day moving average, the furthest the index has fallen below that key technical level since June 2022.
“We’re now talking about multi-decade excesses… in general, this is actually a pretty good starting point,” Giorgi said.
Bailard’s Smith said the sell-off likely created opportunities for stock pickers, but cautioned against expecting a quick recovery.
“It’s very challenging to hit the bottom during a sentiment crash like this,” he said.
ROTATION OUT OF TECH INTENSIVE
The software sell-off has been accompanied by a broader rotation from technology into value-oriented sectors such as consumer staples, energy and industrials, which lagged the bull market that began in October 2022.
“We’re seeing people in general reducing the risks of technology, and we’ve been seeing that since the beginning of the year,” said Andrew Wells, chief investment officer at SanJac Alpha in Houston.
