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US software stocks were hit with a fresh burst of selling on Monday as investors fretted that AI will upend the industry, in a sell-off that cascaded to private capital groups that have lent heavily to tech companies.
Wall Street’s S&P 500 index ended the session down 1 per cent. The tech-heavy Nasdaq Composite lost 1.1 per cent.
Software stocks that have been hit hard in recent weeks by fears around AI disruption were among the worst performers on Monday, with Workday, CrowdStrike and Datadog down 6 per cent, 10 per cent and 11 per cent, respectively.
Salesforce, ServiceNow and Oracle all lost about 4 per cent. IBM tumbled 13 per cent, its biggest one-day decline since 2000.
The moves came after Jenny Johnson, chief executive of $1.7tn US asset manager Franklin Templeton, told the FT that “you really have to question if enterprise software companies can thrive” as new models begin to commoditise their business.
US private capital giants, which have extended loans to software companies and are also holders of their equity, were caught up in Monday’s sell-off, days after Blue Owl sent shivers through the industry by permanently halting investor withdrawals in one of its funds.
Ares, Apollo and Blackstone all fell at least 5 per cent while KKR lost 9 per cent as shares in the companies extended a poor start to the year amid concerns that market volatility caused by worries around AI disruption could slow fundraising and delay asset sales. Blue Owl slid 3 per cent, bringing its fall for the year to about 30 per cent.
The software sector accounted for roughly 18 per cent of US private equity deal value in 2025, according to PitchBook data.
Monday’s declines mark the latest swing lower for the software and private capital sectors following the release of new coding tools by AI start-up Anthropic earlier this month.
Investors have recently seized on social media rumours and incremental developments by small AI companies to justify further selling, with a widely circulated blog post by Citrini Research over the weekend describing how AI could hypothetically push the US unemployment rate above 10 per cent by 2028, proving the latest catalyst.
UBS analysts led by Samantha Meadows said: “Coding has become the first domain where AI demonstrably outperforms humans at scale and as a result, the software sector . . . has emerged as the most immediate pressure point.”
She added: “We see the highest disruption risk [from AI software] in leveraged loans and private credit where tech represents a larger share of holdings.”
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In a sign of the rising concern, redemptions from private debt funds, which are popular among wealthy savers, rose to an average of 4.4 per cent of their net assets in the fourth quarter, from 1.6 per cent in the prior quarter, according to Fitch Ratings.
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Shares in large US banks also came under selling pressure, with JPMorgan Chase, Bank of America, Citigroup and Wells Fargo all falling about 4 per cent.
Investors shifted into defensive positions as riskier sectors fell. The communications sector, which is coveted for its consistent dividends, was among the only gainers on Monday.
US government debt also rose in price, sending yields falling. Yields on 10-year Treasuries fell 0.05 percentage points to 4.04 per cent.
Gold, typically a haven asset, rallied 2.5 per cent to $5,230 a troy ounce.
Additional reporting by Joe Leahy in Beijing and Ian Smith in London
