Salesforce and ServiceNow Fall as AI Automation Fears Hit Software Sector

TLDR

• Anthropic’s Claude Cowork AI plugins launched Friday, automating legal, sales, marketing, and data tasks, causing immediate stock market panic
• Thomson Reuters crashed 18% on Tuesday, its worst day ever, while RELX dropped 14% and Wolters Kluwer fell 13%
• Salesforce and ServiceNow each lost over 9% for the week as software stocks shed $300 billion in value
• Advertising stocks tumbled with Omnicom down 11.2%, Publicis down 9%, Pinterest down 5.6%, and Snap down 8.4%
• Invesco strategist Brian Levitt called the sell-off overdone, saying larger software companies will adapt to AI changes

Anthropic released new Claude Cowork automation plugins on Friday, sparking panic selling across software and analytics companies. The AI tools automate legal research, sales tasks, marketing work, and data analysis that businesses have traditionally paid high prices to access.

Software stocks crashed on Tuesday, Wednesday, and Thursday last week. Investors rushed to reprice companies facing potential AI disruption.

Thomson Reuters suffered an 18% loss on Tuesday, tracking toward its worst single-day decline in company history. The firm owns Westlaw, a leading legal database used by law firms.

Thomson Reuters stock has dropped 33% year-to-date following a 22% decline in 2025. The company reports fourth quarter earnings Thursday.

Mike Archibald from AGF Investments said Anthropic’s plugins directly threaten Thomson Reuters’ legal business. Markets often react to perceived threats before fully analyzing the impact.

Legal Firms and Professional Services Crushed

European legal companies experienced steep losses. RELX, a British legal analytics firm, plunged 14% on Tuesday in its biggest drop since 1988.

RELX shares have fallen nearly 50% from their February 2024 high. Wolters Kluwer, a Dutch legal services provider, dropped 13% the same day.

Factset Research declined 10.5% while Morningstar lost 9%. LegalZoom crashed 19.7% on AI competition fears.

London-listed companies Experian, Sage Group, London Stock Exchange Group, and Pearson all fell between 6% and 12%. Jonathan McMullan from Schroders said investor fear often trumps fundamentals in these situations.

Morgan Stanley analysts reported most investors are pessimistic about Thomson Reuters maintaining legal segment growth. The concern centers on AI agents replacing high-margin knowledge work.

Major software companies joined the decline. Salesforce dropped more than 9% for the week along with ServiceNow.

Adobe fell 7.3% while Microsoft lost 2.9% on Tuesday. Oracle declined 3.4% and Nvidia dropped 2.8%.

Tech and Advertising Stocks Hit Hard

The Nasdaq fell over 2% for the week. The S&P 500 dropped 0.84% on Tuesday alone.

Software companies lost more than $300 billion in combined market value on Tuesday. Advertising firms suffered parallel losses.

Omnicom closed down 11.2% in New York. Publicis fell over 9% after earnings, announcing 900 million euros in planned 2026 acquisitions focused on AI and data assets.

Pinterest lost 5.6% while Snap dropped 8.4%. Giuseppe Sersale from Anthilia said AI now performs programming and knowledge services these business models depend on.

Anthropic’s Claude Cowork can automate drafting, research, and analysis work. These capabilities compete directly with traditional software licenses companies have relied on.

Wall Street strategists urged calm despite the losses. Brian Levitt from Invesco called the selling overdone given actual risk levels.

Software Giants Expected to Adapt

JonesTrading strategist Mike O’Rourke said larger software companies positioned to adapt will survive. New risks exist but won’t severely disrupt all businesses.

Dave Mazza from Roundhill Investors said investors are becoming more selective on valuations. Software companies are shifting from capital-light to capital-intensive AI-focused operations.

Big Tech earnings revealed massive AI spending. Amazon, Alphabet, Meta, and Microsoft capital expenditures will exceed $650 billion.

Consumer Staples and Energy sectors remain undervalued according to Mazza. Cyclical and defensive sectors have outperformed tech stocks this year.

Friday’s market bounce provided relief after the brutal weekly sell-off in software names.

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