This morning (February 4), IT stocks such as Infosys Ltd, Wipro Ltd, and Tata Consultancy Services Ltd tumbled in the Indian market, indicating something very serious had happened. Even Wall Street was jolted overnight, with analysts are now calling a “SaaSpocalypse”.
What’s behind this sudden jolt?
Analysts blame it on Anthropic’s new artificial intelligence (AI) tool — 11 new plug-ins for its Claude Cowork agent, an agentic, no-code AI assistant designed for enterprise users.
But wait, what? How did an AI tool result in the wiping out of hundreds of billions of dollars from software company valuations? We explain it all.
Let’s first understand Anthropic’s new tool that has caused such a hullabaloo.
On January 30, Anthropic, the US company behind the Claude chatbot, released
11 open-source plug-ins for its Claude Cowork agent. These are aimed at automating tasks across legal, sales, marketing and data analysis functions.
In its announcement, the company said: “We’re adding support for plug-ins, which let you bundle any skills, connectors, slash commands, and sub-agents together to turn Claude into a specialist for your role, team, and company.”
While the primary tool at the centre of the ‘SaaSpocalypse’ is the plug-in that targets the legal sector, there are 10 others.
>> Productivity — Manage tasks, calendars, daily workflows, and personal context
>> Enterprise search — Find information across your company’s tools and documents
>> Plugin Create/Customise — Create and customise new plugins from scratch
>> Sales — Research prospects, prep deals, and follow your sales process
>> Finance — Analyse financials, build models, and track key metrics
>> Data — Query, visualise, and interpret datasets
>> Marketing — Draft content, plan campaigns, and manage launches
>> Customer support — Triage issues, draft responses, and surface solutions
>> Product management — Write specs, prioritise roadmaps, and track progress
>> Biology research — Search literature, analyse results, and plan experiments
After the launch of the plug-ins, on February 3, stocks on Wall Street went tumbling.
A Goldman Sachs basket of US software stocks sank six per cent, its biggest one-day decline since April’s tariff-fuelled selloff, while an index of financial services firms tumbled almost seven per cent. The Nasdaq 100 Index fell as much as 2.4 per cent at one point before trimming losses to 1.6 per cent.
European publishing and legal software companies also suffered sharp declines in their share prices. Shares in the UK publishing group Pearson fell by nearly eight per cent, while shares in the information and analytics company Relx plunged 14 per cent. The software company Sage lost 10 per cent in London and the Dutch software company Wolters Kluwer lost 13 per cent in Amsterdam.
On February 4, as markets opened in India, the shares of Indian IT companies crashed. According to Moneycontrol, the Nifty IT index fell more than seven per cent, on track for its worst day since March 2020.
Meanwhile, individual shares of Infosys and LTI Mindtree crashed more than eight per cent each. Similarly, Coforge shares fell nearly eight percent, while Persistent Systems, Mphasis, and Tata Consultancy Services (TCS) shares dropped around seven per cent each. Tech Mahindra and HCL Technologies shares fell around six per cent, while Wipro shares were down nearly five per cent.
The sharp selloff erased Rs 2 lakh crore from the total market capitalisation of India’s top IT stocks.
But why did these stocks collapse?
The crash is all about Anthropic’s new tool and what it means for Indian IT companies. Traders and analysts note that the new tools, which can automate tasks across legal, sales, marketing, and data analysis, can create an AI-fuelled disruption of the data and professional services industry.
As Morgan Stanley analysts wrote in a note quoted by Bloomberg, “Anthropic launched new capabilities for its Cowork to the legal space, heightening competition. We view this as a sign of intensifying competition, and thus a potential negative.”
Jefferies described the episode as a “SaaSpocalypse”, noting a shift in sentiment “from ‘AI helps these companies’ to ‘AI replaces these companies’.”
To explain it in simple terms, the market reaction in India is because of the concern that AI could fundamentally change the competitive landscape for software and IT service companies, causing significant losses and eroding market position.
The analysts noted that if AI can automate many of the functions, then IT services built around delivering them could face existential challenges.
Systematix Group analyst Ambrish Shah told Moneycontrol, “As Indian enterprises integrate Claude for critical coding workflows, dependency on large vendor teams may decline, squeezing billable hours and margins. Anthropic’s advanced AI systems also threaten entry‑level talent pool at Indian IT firms by replacing routine development and testing tasks.”
What comes next?
However, for those who think that Wednesday’s turn of events signals the end of the Indian IT sector, think again.
Siddharth Maurya, founder & managing director, Vibhavangal Anukulakara, was quoted as telling Moneycontrol that the sell-off in Indian IT stocks appeared to be more of a sentiment-based reaction than a sudden deterioration in fundamentals. He said that the markets may be overestimating the AI threat in the short term.
What is certain is that volatility is here for a while. Every new AI announcement from global players will test market nerves.
With inputs from agencies
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