Technology stocks experienced a sharp decline Thursday following news that artificial intelligence company Anthropic has limited distribution of its latest AI system due to cybersecurity concerns, reigniting market anxiety about AI’s potential to disrupt established software businesses.
Earlier this week, Anthropic announced it would restrict access to its “Claude Mythos” AI system to approximately 40 select companies, including tech giants Microsoft and Google. The decision came after the model identified thousands of security flaws across major operating systems and web browsers.
“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,” explained Michael O’Rourke, chief market strategist at JonesTrading.
The market reaction was swift and severe. The S&P 500 Software and Services Index dropped 3.1% on Thursday, contributing to a nearly 26% decline for the year as investors worry about AI’s impact on subscription-based software companies.
Cybersecurity companies bore the brunt of the selloff, with stocks like Cloudflare, Okta, CrowdStrike and SentinelOne falling between 4.7% and 7.7% during morning trading sessions.
Zscaler emerged as one of the day’s worst performers on the S&P 500, plummeting 8.6%. Investment firm BTIG contributed to the decline by downgrading the stock from “buy” to “neutral,” expressing worries about customer demand and increased 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,” noted Steve Sosnick, chief market analyst at Interactive Brokers.
The widespread decline affected major enterprise software companies as well. Atlassian, Workday, Adobe, Salesforce and Intuit all saw their share prices drop between 3.7% and 6.8% as investors reassessed the competitive landscape in light of advancing AI capabilities.
