Legal Tools Unleashed
The market turbulence began on January 30th when Anthropic enhanced its Claude Cowork assistant with new functionalities aimed at the legal sector. These
additions, designed to streamline tasks like compliance tracking and legal document management, ignited widespread concern among investors. The immediate implication was that AI could profoundly disrupt the market for existing software-as-a-service companies, particularly those serving the legal and publishing industries. This fear manifested dramatically in the stock market; the iShares Expanded Tech-Software Sector ETF saw an immediate 11% drop in the four days following the announcement. Prominent companies experienced significant losses, including Varonis Systems, which fell 25%, AppLovin down 22%, Circle at -21%, Thomson Reuters Corp at -19%, HubSpot at -18%, RELX PLC at -15%, and LegalZoom.com at -14%, underscoring the acute sensitivity of the market to AI's perceived encroachment.
Cybersecurity Code Scanned
Following a brief period where other companies made AI-related announcements, Anthropic resurfaced on February 20th with another potent update for its AI chatbot, Claude. This latest development introduced a feature within Claude Code specifically designed to identify security vulnerabilities in software. While the broader software sector felt the impact, cybersecurity stocks were disproportionately affected, experiencing a sharp downturn. This reaction became evident at the beginning of the following week, with cybersecurity equities and exchange-traded funds (ETFs) plummeting during Monday's trading session, and some continuing their decline into Tuesday. Among the notable decliners were CrowdStrike, which lost 15% of its value, Okta at -12%, and Zscaler at -11%. The iShares Cybersecurity and Tech ETF also registered a 6% decrease, highlighting the amplified vulnerability of companies within this critical tech niche to AI-driven innovation and disruption.
COBOL Modernization Power
Anthropic continued to stir the pot on February 23rd with a blog post detailing Claude's advanced capabilities in modernizing legacy code, specifically mentioning COBOL (Common Business-Oriented Language). The post emphasized how AI could significantly reduce the traditionally immense costs and lengthy timelines associated with updating COBOL systems, which are still foundational for many enterprises. The AI company stated that modernizing such systems previously required extensive consultant efforts over years, a process AI aims to revolutionize. This announcement triggered a significant market reaction, with IBM's stock experiencing its worst losses in 26 years, dropping 13%. The iShares Expanded Tech Sector ETF also saw an additional 4% decline on the same Monday, intensifying existing market anxieties about AI-fueled business model transformations. Other notable stock movements included Asana, which fell 9%, Snowflake down 8%, Accenture at -6%, and Cognizant Technology, also down 6%, reflecting a broad unease across the tech landscape.
