Data Service Stocks Plunge Up to 10% as Anthropic Releases AI in Legal Space
Shares of legal software firms and data service companies took a significant hit on Tuesday, with drops of up to 10% following the release of a new AI automation tool by Anthropic. Investors are concerned that this innovation could disrupt their core businesses.
Market Reactions to Anthropic’s AI Release
– Major Declines:
– RELX Plc and Wolters Kluwer NV, both known for professional analytics, fell over 10%.
– Experian Plc, a credit-reporting firm, dropped by 9%.
– Other significant declines included the London Stock Exchange Group, Thomson Reuters Corp., Legalzoom.com Inc., and FactSet Research Systems Inc., each slipping around 10% or more.
– ETF Impact: The iShares Expanded Tech-Software Sector ETF declined by as much as 4.4%. Additionally, a UBS Group AG basket of European stocks perceived as vulnerable to AI disruption fell nearly 7%.
Competitive Landscape in Legal AI
Morgan Stanley analyst Toni Kaplan remarked on the implications of Anthropic’s new Cowork tool for the legal space, noting, “This marks the onset of intensified competition and may pose risks for existing players.”
Notable Players in Legal AI
Anthropic is one among a growing number of AI startups targeting the legal industry. Prior to Anthropic’s release, companies like Legora and Harvey AI had already begun shaking up the legal landscape, promoting solutions designed to alleviate the burden of routine tasks for lawyers. Notable valuations include:
– Harvey AI: Valued at $5 billion last year.
– Legora: Raised funds at a valuation of $1.8 billion.
Disruptive Potential of Anthropic’s AI Tools
Anthropic distinguishes itself in the AI realm as a major model developer with capabilities customizable to specific industry needs. This positions them to disrupt not only traditional legal news and data services but also its emerging AI competitors. Their website promotes a legal tool designed for automating tasks such as contract reviewing and legal briefings, although it emphasizes that all AI outputs should still be reviewed by licensed attorneys.
Broader Impacts on the Software Industry
Concerns about the software industry’s vulnerability to AI advancements are mounting. The recent launch of Anthropic’s Claude Cowork tool has heightened fears of disruption, following Alphabet Inc.’s rollout of Project Genie, a tool for creating immersive environments through text or image prompts.
According to Bloomberg’s analysis, during the current earnings season, only 71% of software companies in the S&P 500 have surpassed revenue expectations, compared to 85% across the entire tech sector.
Conclusion: Navigating an AI-Driven Future
As Stephen Yiu, CIO of the Blue Whale Growth Fund, pointed out, this year may be crucial in determining which companies will emerge as winners or victims of AI. “Avoiding the losers will be essential as we navigate this rapidly evolving landscape, said Yiu. Until the situation stabilizes, companies in the data service sector face a challenging path amid the growing influence of AI technologies like those introduced by Anthropic.