JPMorgan Reportedly Highlights Investors Are Losing Faith In Software As AI Advances – Sector ‘Is Now Being Sentenced Before Trial’

JPMorgan Chase & Co. said sentiment toward software companies has grown notably harsher, with valuations now punished before firms can make their case.

• Shares of many established software companies worldwide fell sharply on Tuesday as traders grew increasingly uneasy about the risks of AI tools. 
• Analyst Toby Ogg said companies must prove convincingly that AI will fuel expansion rather than undermine growth prospects. 
• The selloff gained momentum after Anthropic introduced a new AI legal automation product.

A sustained downturn in software shares persisted worldwide on Wednesday as investors continued to pull back from industries they believe face mounting pressure from artificial intelligence. 

Shares of many established software companies fell sharply on Tuesday as traders grew increasingly uneasy about the risk that artificial intelligence innovations could erode demand for traditional subscription software.

Sentiment Toward Software Firms Worsens, Valuation Takes A Hit

According to a Bloomberg report, JPMorgan Chase & Co. (JPM) said sentiment toward software companies has grown notably harsher, with valuations now punished before firms can make their case. Analyst Toby Ogg described the mood as unusually unforgiving after weeks of conversations with institutional investors across Europe and the United States.

“We are now in an environment where the sector isn’t just guilty until proven innocent but is now being sentenced before trial,” Ogg said. 

Even following recent price drops, interest in buying the dip remains muted, signaling skepticism about the sector, added Ogg. 

AI Fears Drive Sector-Wide Declines

The comments followed a sharp selloff on Tuesday that swept through software, financial services, and asset management shares. The slide gained momentum after Anthropic introduced a new AI legal automation product.

The AI platform’s latest features are designed to automate tasks such as drafting and research, raising concerns that these capabilities could reduce reliance on traditional software packages. 

According to Ogg, earnings beats alone no longer reassure investors. Instead, companies must prove convincingly that AI will fuel expansion rather than undermine growth prospects. 

One area of concern centers on seat-based pricing, where customers pay per user. AI-driven efficiencies could reduce the need for multiple logins, thereby weakening that structure, the report cited.

Among the affected software providers in the U.S., Intuit Inc. (INTU) led the selloff, sliding roughly 11%, Adobe Inc. (ADBE) fell 7%, Salesforce Inc. (CRM) declined 6%, and shares of Microsoft Corp. (MSFT) and Oracle Corp. (ORCL) slid 2% and 3%, respectively. 

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