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It was a terrible time today (3 February) for investors in many FTSE 100 tech companies. These stocks were getting crushed like cans of pop under a steamroller.
RELX was getting hammered, with its share price dropping as much as 16.5%. Next came London Stock Exchange Group (down 10%) credit bureau Experian (-8.25%), and specialist publishers Pearson (-7.9%) and Informa (-5.7%).
The shocking thing here is that many of these stocks already looked oversold before today’s crash. London Stock Exchange Group was down roughly 32% in a year, as was Experian. RELX is now 45% off its May peak.
The one thing they have in common is that they’re data companies. These were previously seen as AI winners, but the market has quickly changed its mind.
Across the pond, most US software stocks were also taking a pummelling. Here’s why.
A familiar AI-shaped culprit
The culprit for the massive sell-off was artificial intelligence (AI) firm Anthropic, the marker of Claude. It has launched a suite of 11 agentic AI plugins designed to automate various tasks.
Specifically, it released a tool targeted at in-house legal teams and academic researchers. It can review documents and flag risks, as well as track compliance. So the worry is that this will take market share from products sold by RELX (which owns LexisNexis).
Basically, all data/software stocks are currently under siege due to Claude Cowork’s new automation tools.
Waves
I’ve been writing on these pages for some time about how AI is different to previous disruptive technologies. People dismissing AI as just silly chatbots are completely missing the point.
While the internet displaced print-based publishers and bricks-and-mortar retailers, that largely played out over two decades. It still is (look at many UK high streets today).
However, AI is a different beast altogether. As Scottish Mortgage‘s manager Tom Slater puts it, “AI is not a single product or service, it is a general-purpose technology that will ripple through every corner of the economy“.
Even if AI is in a ‘bubble’ that pops, that doesn’t mean the genie goes back in the bottle and we all carry on like before. There will likely be waves of disruption once the technology starts self-improving.
Opportunities
The good news for investors is that the selling right now is absolutely indiscriminate. Perfectly good stocks are being dumped due to blind panic.
And when things like this happen, there will inevitably be wealth-creating opportunities.
One stock that got caught up in the selling today was car buying and selling platform Auto Trader (LSE:AUTO). It fell 4.7%, bringing the decline to 44% inside eight months!
To be fair, the firm has faced a backlash from car dealers recently. Its Deal Builder tool was said to be reducing leads, which provoked an apology from the firm and a promise to tweak the product. So this adds some near-term uncertainty.
However, Auto Trader stock has also been pulled down by AI disruption fears, and I believe these to be overblown. Consumers are slow to switch habits, and the company is synonymous with online car buying in the UK.
Auto Trader has a trusted brand and boasts an incredible 63% operating margin. Now trading at a mere 13.5 times forward earnings, I think this stock is a dip-buying opportunity worth looking into.
