Claude Cowork Plugins Trigger a SaaS Stock Selloff, but Partnerships Lead to Slight Rebound

Makers of software that runs large companies saw their share prices plunge as investors worried that AI systems could undermine their businesses. This week, their stocks rebounded somewhat as Anthropic partnered with some of the same companies.

What’s new: Investors, alarmed by the prospect that AI-enabled coding systems could reproduce popular software tools, drove down the S&P Software & Services Index, which includes software giants such as Microsoft, Oracle, Salesforce, and Workday. The index lost 25 percent of its value between January 12, when Anthropic introduced Claude Cowork, an agent designed for professional work, and February 23, when it showed signs of recovering.

SaaSpocalypse now: The stock selloff affected mostly vendors of software subscriptions via the web, a business known as software as a service (SaaS). Jeffrey Favuzza, a strategist at the investment firm Jefferies Financial Group, dubbed the event the “SaaSpocalypse.”

Anthropic poured fuel on the fire with further releases designed to take on tasks typically performed by SaaS offerings. On January 30, Anthropic released 11 open-source plugins, each targeting a white-collar job function. The functions include calendar management, document search and retrieval, sales, financial analysis, data queries and visualizations, legal review and compliance, marketing, customer support, product management, and biology research, plus a plugin that creates and customizes new plugins. Independent developers quickly contributed a wave of plugins that delivered functionality similar to other business software.
Four days later, the S&P Software & Services Index dropped 4 percent to wipe out more than $285 billion in market capitalization. JPMorgan’s software index lost 7 percent. Shares of LegalZoom.com tumbled nearly 20 percent, Thompson Reuters 16 percent.
On February 20, Anthropic unveiled Claude Code Security, a cybersecurity application designed to detect and patch software vulnerabilities after human review. A selloff of shares in security software companies followed. (Google’s CodeMender and OpenAI’s Aardvark similarly perform AI-powered security functions.)
On February 24, Anthropic extended an olive branch to software companies when it announced integrations with some of the companies that Cowork threatens, including Docusign, FactSet, Google’s Gmail, Intuit, and Salesforce. Instead of bypassing their applications, a new wave of Cowork plugins connect to them directly. The new approach also gives companies more control over how the plugins are used and monitored. SaaS stocks jumped, although they did not recover their earlier losses.

Behind the news: With the rise of AI-assisted coding, observers have suggested that AI could disrupt traditional software either by replicating its capabilities or enabling agents to replace human users. In the latter scenario, AI would end the “lock-in” effect in which customers remain loyal to a particular service because they don’t want to adjust to a different vendor’s user interface or workflow. In December, Lee Robinson, vice president of developer education at Cursor, which makes AI-assisted coding tools, wrote that his company had completely replaced a content management system it previously paid for, Sanity, with a custom setup it built from scratch. The company now manages its web pages using git and saves tens of thousands of dollars in recurring fees. Sanity spokesman Knut Melvær wrote a public reply noting that Sanity’s product serves purposes, such as facilitating collaboration, that can’t easily be replicated using Cursor’s setup.

Why it matters: Investors may have panicked, but their attention isn’t misplaced: AI is changing the software market. Nonetheless, many SaaS companies will continue to thrive, and new opportunities will continue to emerge. Large language models can dissolve some competitive barriers, but others remain solid, as Fintool CEO Nicolas Bustamante explains in an insightful social media post. Agents can operate unfamiliar user interfaces, navigate complex business processes, access public datasets, and collapse expertise in multiple areas into one application. On the other hand, systems based on LLMs can’t necessarily replace SaaS offerings that rely on proprietary data, regulatory compliance, network effects, or embedded transactions. The message of the SaaSpocalypse is not that software is dead. It’s that small teams can build competitive products rapidly, and the products that have staying power will be built on resources that are beyond the reach of LLMs.

We’re thinking: SaaS isn’t dying, it’s becoming AI-native.