Anthropic is stirring up trouble in the software industry

Investor nervousness spilled over into the software sector yesterday following Anthropic’s announcement of new AI solutions. Violent price swings hit several stocks and ultimately dragged US indices into negative territory. The rebound sketched out on Monday was wiped out in the process. Today’s session will be dominated by corporate earnings releases and by the question of the moment: should the software sector’s idols be burned?

Financial markets have been flirting with radicalisation for several days. The surge in volatility illustrates this perfectly, without anyone really knowing which came first, the chicken or the egg. What we do know, however, is that strategies are increasingly veering into Manichaeism. Investors sell aggressively and buy news aggressively. In fact, they sell it more than they buy it. The scoreboards were striking: -9% in France for Capgemini and Publicis. -20% in the United States for PayPal and Gartner. -14% for Relx and -13% for the London Stock Exchange in London. Behind these extreme moves lie two independent forces.

On the one hand, corporate earnings. When volatility is high and investors are on edge, reactions to quarterly results can be brutal. Publicis and PayPal paid the price.

On the other hand, the technological fault line, generally summed up by the term "disruption". Anthropic announced yesterday the launch of a new legal support tool for basic corporate tasks. The messaging sent providers of professional data solutions tumbling, notably Relx and Wolters Kluwer, which are highly exposed to the legal sector. The shockwave spread to companies that bill for analysis and advisory services (Capgemini, Accenture, etc.) and to those that generate profits from data (London Stock Exchange, Experian, etc.). More broadly, the software sector (Salesforce, Adobe, etc.) was taken to the cleaners, along with private equity groups exposed to the space (KKR, Ares Management and Blue Owl all sank by more than 9% as well).

Since ChatGPT burst into everyday human life (it was late 2023), everyone has had an opinion on the economic winners and losers of AI. The two lists have shifted constantly. They are still shifting. Enterprise software specialists and consultancies producing all sorts of reports were very quickly singled out as potential victims. Their executives worked hard to explain that AI is an accelerator for their businesses rather than a threat. The message more or less got through, but the sector is regularly caught up by technology on the march.

With its new tool, Anthropic is clearly telling some of these professionals: hello, I am stepping onto your turf, and I have all kinds of shoes to do it. Software analysts tend to downplay the impact, with lines such as "we already knew this", "they have more moat than people think", "LLMs need these players to make their offerings reliable", "they announce a lot but we do not know the real effectiveness", and so on. There is some common sense in all that, but say what you will, the slice of cake is smaller when too many people turn up at the birthday party. In any case, this episode crystallises investors’ latent fears. Adobe is down 22% since 1 January. Salesforce -26%. Capgemini -14%. Constellation Software, the Canadian benchmark for software investment, -31%.

The slump in software and services companies pushed the Nasdaq 100 down 1.55% yesterday. The S&P 500 limited its losses to 0.84%. Earlier in Europe, indices held up better, but by leaning on defensive segments: non-cyclical consumer goods, energy, utilities and basic materials. Basic materials and energy are the two most prolific sectors on the Old Continent since 1 January. As uncertainty grips the intangible, commodities provide reassurance. It is a theme I have already discussed and one that continues to enjoy a strong tailwind, against a geopolitical backdrop of a scramble for mining supplies.

The day will be dominated by corporate earnings. Novartis, UBS Group, GSK, Infineon, Equinor and Crédit Agricole report this morning in Europe. Novo Nordisk already delivered last night, to a very, very negative reception. Alphabet, Eli Lilly, AbbVie, Costco, Uber, Qualcomm, Boston Scientific and Arm Holdings will be the main headliners in New York. Among the AI barometers, AMD disappointed last night (-8% after hours), but Super Micro (+7%) reassured. I do not know what to make of that combo.

On the macro front, the Bund/OAT spread is seesawing, oil is rising again on Iran/US provocations in the Persian Gulf, and precious metals have stabilised after recent rollercoasters. The yen gained ground as Prime Minister Sanae Takaichi’s party is expected to triumph at the polls this weekend, opening the way to a more assertive economic support policy. In the United States, Donald Trump has signed into law the bill ending the mini-shutdown that began on Saturday. Markets will focus on the ADP employment report, as statistical agencies confirmed on Monday that they will be unable to produce the January monthly jobs report on Friday. The ISM services index will also attract plenty of attention after the country’s manufacturing rebound.

In Asia-Pacific, the previous day’s US software purge did not cause too much of a stir. Japan is still down 0.8%, but other markets are more resilient. South Korea is up 1.5%, Australia 0.8% and Taiwan 0.3%. India is digesting its strong gains from the day before (-0.1%). Leading indicators are slightly bearish in Europe, but the heavy slate of morning earnings could still shift the picture.

Today's economic highlights:

On today's agenda: RBA Jones Speech in Australia; Services PMI in Spain and Italy; Yearly and monthly inflation rates, as well as core inflation in the Euro Area; Yearly and monthly inflation rates in Italy; In the United States, the MBA 30-Year Mortgage Rate, ADP Employment Change, ISM Services PMI, and EIA Crude Oil and Gasoline Stocks Change. See the full calendar here.

• GBP / USD: US$1.37
• Gold: US$5,070.19
• Crude Oil (BRENT): US$67.72
• United States 10 years: 4.28%
• BITCOIN: US$76,539.6

In corporate news:

• HSBC has had its EPS forecasts raised by BofA Global Research following the privatization of Hang Seng Bank, maintaining a buy rating.
• Lloyds Banking plans to increase lending to corporate clients and expand its offerings to financial institutions, according to the Financial Times.
• Shell has agreed to sell a 20% stake in the Orca deepwater project offshore Brazil to Kuwait Foreign Petroleum Exploration Co.
• Glencore has agreed to sell a 40% stake in its Democratic Republic of Congo assets to a US-backed consortium for around $9 billion.
• Drax Group has begun a consultation process that could lead to more than 350 job cuts.
• BAE Systems received a $195 million contract for 30 additional amphibious combat vehicles.
• Novo Nordisk fell in New York after sharply lower forecasts for 2026.
• UBS exceeded expectations with a profit of $1.2 billion in the fourth quarter.
• Infineon posted revenue of €3.662 billion in the first fiscal quarter.
• TomTom expects its revenue to decline or stabilize in 2026, followed by growth in 2027.
• Banco Santander acquires US-based Webster Financial for €10 billion.
• Nestlé recalls a batch of Guigoz brand infant formula in France.
• AMS-Osram sells its sensor business to Infineon for €570 million.
• Prosus signs a three-year AWS contract to deploy AI in Latin America, Europe, and India.
• Securitas acquires Liferaft, a leading provider of SaaS threat intelligence platforms.
• US shares up after hours following earnings: Lumentum (+8.5%), Take-Two (+5%), Emerson (+3%)…
• US shares down after the close following earnings: AMD (-8%), Chipotle (-6%), Mondelez (-4%), Corteva (-3%)…
• Ford is reportedly in talks with Geely to allow the Chinese manufacturer to use its factories in Europe, according to Reuters.
• Texas Instruments is negotiating the acquisition of Silicon Laboratories, the FT has learned.
• Sales of Nvidia AI chips to China blocked by US security review, reveals the FT. Nvidia is also reportedly close to investing $20 billion in OpenAI.

See more news from UK listed companies here

Analyst Recommendations:

• Pan African Resources Plc: Canaccord Genuity maintains its buy recommendation and raises the target price from GBX 135 to GBX 160.
• Wizz Air Holdings Plc: Goodbody downgrades to sell from hold and reduces the target price from GBP 12 to GBP 9.50.
• Airtel Africa Plc: Deutsche Bank maintains its buy recommendation and raises the target price from GBX 390 to GBX 430.
• Rotork Plc: BNP Paribas upgrades to outperform from neutral with a price target raised from GBX 370 to GBX 415.
• Glencore Plc: RBC Capital maintains its outperform recommendation and raises the target price from GBX 530 to GBX 540.
• Coca-Cola Hellenic: Jefferies maintains its buy recommendation and raises the target price from GBX 4400 to GBX 4600.
• Molten Ventures Vct Plc: CIBC Capital Markets upgrades to outperform from neutral with a price target raised from CAD 77 to CAD 117.
• The Berkeley Group Holdings Plc: JP Morgan upgrades to overweight from neutral with a price target raised from GBP 47 to GBP 50.
• Intercontinental Hotels Group Plc: UBS maintains its neutral recommendation and reduces the target price from USD 141.35 to USD 141.05.
• Centrica Plc: Citi maintains its neutral recommendation and raises the target price from GBP 1.85 to GBP 2.