00:00Asian markets showing signs of weakness today following a stock rotation in the U.S.
00:05Declines in software makers weighed on Wall Street as traders sold out of the sector
00:10of the worries about how AI may impact the industry.
00:14For more, let's bring in our Asia Tech correspondent, Annabelle Jules.
00:17Bell, why did we see such extreme selling pressure?
00:21Yeah, it certainly was a very broad-based sell-off overnight.
00:26It sparked, of course, initially in these software stocks that relate to the legal sector in particular.
00:31But I think we just need to sort of walk it back a bit and talk about what we've really been seeing
00:35for software stocks for a number of months now, which is, again, a lot of downward pressure
00:39and concerns about the impact of AI to that traditional business model.
00:44So this year in particular, we've had a very weak beginning.
00:48And software in particular, software stocks are really being affected by releases that we're seeing from Anthropic.
00:54Now, Anthropic's AI tools have been particularly successful with enterprise customers.
00:59And just a couple of weeks ago, we were discussing this very same topic because it was the release
01:03or the early release of an AI agent called Claude Cowork.
01:07And now Claude Cowork's capabilities have been expanded to the legal sector,
01:11which is why you saw that sustained pressure overnight.
01:14But you can see here this chart.
01:15I mean, you're looking since the beginning of 2025,
01:18and you can see that the trajectory has been downward,
01:20even though it has accelerated at the start of 2026.
01:25The concern here is that when you have these AI tools and Claude Cowork was built mostly using AI agents,
01:32it really threatens that software as a service model that's been one that's really stood in place
01:39for a number of years now, continuing or recurring revenue streams for these businesses.
01:44That's certainly at risk, and it's why investors are leaving, rather, this group as a cohort.
01:52Belle, what about the read across to Asia?
01:55Will the impact be as bad?
01:58Yeah, definitely in the session so far today,
02:00we are seeing some names that are coming under quite significant pressure,
02:04particularly in Australia.
02:05You're also seeing some laggards in Japan as well.
02:08It'll be interesting to see how some of the key software names in India open in about 45 minutes from now.
02:14But overall, actually, the analysts we're talking to are a little bit more positive on the outlook for Asia,
02:19and there's a couple of different reasons for that.
02:22You've got the likes of IG International, for instance,
02:24that says that actually Asian tech firms are further up the value stream when it comes to AI,
02:30so a little bit more insulated, perhaps.
02:32Yes, you might see some selling pressure in names like Tencent or Baidu or Alibaba,
02:38but they're actually doing much better at AI monetization.
02:42Allspring, global investments, you can see here, again,
02:44they're saying that the Asian tech sector is better positioned with that heavier weighting,
02:49of course, toward hardware, particularly in Taiwan and Korea.
02:54But Wilson Asset Management, again, they're saying that sell-off in Asia should be less intense.
02:59But, of course, it is today very much a weakness.
03:03You can see the overall IT sector down 1.3% right now.
Comments