A new wave of "soft-apocalypse" on the market: which stocks are investors selling out?

The sell-off in the software sector intensified in trading on Friday, April 10, due to a new surge in investor concerns about the disruptive impact of artificial intelligence on entire industries. The wave of sell-offs in IT stocks was triggered by the Mythos AI model from AI startup Anthropic: it has not been released yet, but, according to the company, this artificial intelligence finds the smallest holes in the cybersecurity of global corporations.

Shares of software developers and cybersecurity vendors declined in trading on Friday. For example, Palo Alto Networks, Twilio and ServiceNow were down more than 9%, Snowflake was down more than 10%, and Datadog and CrowdStrike were down more than 7.5%.

Investors are increasingly worried about Mythos, Anthropic's future model, which the company says is so powerful that it can overcome existing cyber defense systems if abused by attackers, MarketWatch explains. For now, Anthropic isn't releasing the model: it has announced the formation of a coalition of leading tech companies that will fortify their server defenses in advance of gaining early access to Mythos.

The situation is also causing concern among US authorities: Federal Reserve Chairman Jerome Powell and US Treasury Secretary Scott Bessent this week discussed the cybersecurity risks posed by AI with the heads of major US banks, CNBC and Bloomberg reported.

"Investors are concerned that Mythos will prove so powerful that it could reshape the entire enterprise software stack in a way that reduces the value of off-the-shelf software products," D.A. Davidson analyst Jim Luria told MarketWatch.

"The software apocalypse spared no stocks [of the Software Developers Industry Index, which fell 4% the day before] on Thursday [April 9], but in our view, Snowflake's decline was perhaps the most unexpected, given that clean and reliable data will be key for corporate agents," Evercore ISI analyst Kirk Matherne, quoted by MarketWatch, wrote in a note to clients on Friday.

UBS on Thursday downgraded its recommendation on ServiceNow shares from "buy" to neutral. The bank's analysts, led by Carl Kiersted, wrote that they had previously considered ServiceNow's securities to be more immune to the AI threat, but now their "confidence in this view has weakened," MarketWatch quoted them as saying.

Citi on Friday downgraded the ratings of several stocks that have been in the center of investors' attention amid worries over the destructive impact of AI, Barron's writes. Among them are Docusign, whose shares have fallen 37% since the beginning of the year, Veeva Systems, which has lost 33% of its capitalization, and Autodesk, whose securities have fallen by almost 27%. Over the same period, the Nasdaq Composite Technology Sector Index fell only 1.4%, while the iShares Expanded Tech-Software Sector ETF fell 30.5%.

"We believe most of these companies are good businesses and may be well positioned in the long term, but they lack bright growth drivers over the next 12 Ma," the Citi analysts wrote. In their view, "it will be difficult for investors to feel confident in the sector as a whole" until they see a more marked acceleration in growth and more clarity on where developers like OpenAI and Anthropic will focus as they move into the enterprise software market, they said.

That said, Citi considers the winners to be data infrastructure and hyperscaler companies "with a clearer growth trajectory," citing MongoDB, Snowflake, Palantir Technologies and Microsoft as examples.

This article was AI-translated and verified by a human editor