Enterprise software stocks took a beating Tuesday, with Adobe closing down 7.31%, Salesforce falling 6.85%, and Thomson Reuters dropping 15.83%. The trigger: Anthropic's release of AI tools designed to handle legal workflows, raising questions about how much traditional software will survive the AI transition.
The selloff extended beyond public markets. Private equity firms like Blue Owl and Ares, which hold significant software portfolios, saw their shares decline as investors recalculated the value of legacy enterprise platforms. LegalZoom and Expedia also fell sharply.
Nvidia's Jensen Huang pushed back, dismissing fears that AI will replace software tools entirely. He's probably right - the question isn't whether software disappears, but which layers get commoditized and which retain pricing power. Legal research tools are obvious targets. Mission-critical ERP systems with decades of customization are harder to displace.
Worth noting: this is the market sentencing companies before trial. Anthropic's legal tools are new. Implementation timelines in enterprise are measured in years, not quarters. Procurement cycles, integration challenges, and risk-averse legal departments all slow adoption.
But the direction is clear. Software vendors that charge per-seat for tasks AI can automate face margin compression. Companies building AI-native workflows have an opening. CIOs watching this should ask: which of our vendor contracts are vulnerable, and which capabilities do we need to own?
The parallel to SaaS disrupting on-premise software is obvious. That transition took a decade, and incumbents with strong distribution (Microsoft, Oracle) adapted. This time the pace might be faster - AI inference costs are dropping monthly, and the technology gap between leaders and laggards is widening.
For APAC enterprises still early in cloud migrations, this creates a question: do you finish lifting-and-shifting legacy systems, or leap directly to AI-native architectures? The answer depends on your risk tolerance and how much technical debt you can afford to carry.