AI "Ghost" Strikes Wall Street Again: Amazon's New Tool Sparks Disruption Concerns as U.S. Stock Software Shares Plunge

The Chinese-language financial app, Zhitong Finance, reports that U.S. software stocks plummeted on Tuesday, reigniting concerns over disruption in the sector caused by reports about Amazon’s (AMZN.US) new AI tools over the past few months. Data shows that an ETF tracking software stocks fell 4.3%, the largest drop in a month. UiPath (PATH.US) and HubSpot (HUBS.US) led declines, each dropping about 9%; Atlassian (TEAM.US), the parent company of Trello, fell 8.4%.

According to media reports citing insiders, Amazon Web Services (AWS), Amazon’s cloud computing division, is developing an AI agent capable of automating sales, business development, and other team functions—departments that were involved in the company’s recent large-scale layoffs. The report states that the AI agent AWS is developing can handle workloads in cybersecurity, server networks, and other areas involving thousands of technical experts.

Since the beginning of this year, software stocks have remained under pressure. Several AI startups, including Anthropic, have released next-generation AI tools, sparking market worries about the growth prospects of traditional software companies. The iShares Expanded Tech-Software Sector ETF has fallen over 23% since late 2024, heading toward its worst quarterly performance since 2008.

On Monday evening, Anthropic announced that its Claude chatbot can now take over tasks on users’ computers, such as browsing the web and filling out spreadsheets. Meanwhile, the latest developments in the U.S. private equity industry, which has significant exposure to software stocks and has experienced a wave of redemptions amid fears of AI disruption, have further fueled anxiety. Ares Management (ARES.US) and Apollo Global Management (APO.US) are restricting redemptions from private credit funds. Prior to this, concerns about rising risks in lending to software manufacturers and other companies vulnerable to AI impacts had already triggered a wave of redemption requests.

Despite ongoing worries about the U.S. software sector, Wedbush analyst and market “tech bull” Dan Ives has challenged the persistent sell-off earlier this month, calling it the most disconnected tech trading he has seen in 15 to 20 years. Ives believes that fears of AI disrupting traditional software companies are exaggerated, leading to what he calls “AI ghost trading,” which unfairly punishes the sector.

Ives stated, “Ultimately, software—from Salesforce (CRM.US) to ServiceNow (NOW.US), and in cybersecurity, CrowdStrike (CRWD.US), Palo Alto (PANW.US)—is the key. I think this is the most severe sell-off I’ve seen in decades.” He pointed out that recent advances by AI company Anthropic in intelligent agents could signal a bottom for software stocks. He remains convinced that the true value of AI lies in mature software platforms rather than pure AI companies.

Ives said, “My view is that AI might disrupt some pure software vendors relying on a single product. But the reality is, data and value reside in the tech stack. It’s built on the installed bases of companies like Salesforce, ServiceNow, Workday, Oracle, and others.” He predicts that 30% of AI spending will eventually flow to software companies, citing Palantir (PLTR.US) as having demonstrated monetization potential. He also expects industry consolidation. “Right now, even taxi drivers in Miami are bearish on software, but I see that as a bullish signal compared to my overall outlook for the sector this year.”

Notably, the Wedbush analyst team led by Dan Ives stated in early February that, although AI could pose short-term pressure on traditional software business models, the market’s reaction to this risk is overly exaggerated. The current sell-off in software stocks already implies an extreme assumption of “industry-wide AI disruption,” which they believe is unrealistic.

Ives emphasized that corporate clients are more cautious about AI migration than the market perceives. Many companies are reluctant to expose their core data to immature new platforms just to chase AI gains, and they are unlikely to abandon decades of investment in software infrastructure built with hundreds of billions of dollars. “AI is a headwind in the short term, no doubt, but the current market pricing, as if the software industry is about to face ‘doomsday,’ is completely disconnected from reality,” he said.

Wedbush highlighted that the large enterprise software ecosystem already contains trillions of data points, and emerging AI companies like OpenAI and Anthropic, in terms of data capacity and enterprise security, are unlikely to fully take over these complex systems in the near term. Instead, AI is more likely to be embedded as tools within existing software platforms rather than replacing them entirely. Wedbush also pointed out that Microsoft (MSFT.US), Palantir, CrowdStrike, Snowflake (SNOW.US), and Salesforce are the five most promising software stocks during this “software winter.”

Nvidia (NVDA.US) CEO Jensen Huang also dismissed concerns in early February that AI would replace software and related tools, calling such ideas “illogical.” During a speech at an AI conference hosted by Cisco Systems in San Francisco, Huang said that fears of AI diminishing the importance of software are misleading. He believes AI will continue to rely on existing software rather than rebuilding foundational tools from scratch.

JPMorgan strategists also noted that, in the long run, whether traditional software companies will be replaced by AI remains uncertain, but the market’s current pessimism about AI disruption is an “overreaction.” Microsoft and CrowdStrike are among the companies they see as resilient to AI, likely to benefit from AI-driven workflow efficiencies. The team pointed out that high switching costs and multi-year contracts in enterprise software provide a buffer against short-term shocks.