Yesterday's relief rally in software stocks was quickly crushed and today the war lows were promptly taken out. The IGV software ETF is down 4.6% on the day.
While the war was going on, Anthropic released more details on Claude and just yesterday, Meta released a solid model that highlights that scaling laws still apply.
It's also tax time and one stock that's getting hit particularly hard today is Intuit, which is down 8.4%. Americans are increasingly flirting with using Claude and other models to fill out their tax forms and finding success. That's a big threat to Intuit and to accountants in general.
Shares of INTU have been nearly cut in half since July.
Service Now is another big loser today, down nearly 8% and at a fresh 52-week low along with Adobe.
For these stocks, valuations don't really matter at the moment as the market prices in future disruption and the possibility that tools that currently cost $20/month will destroy their business models.
The big event this year in stock markets is going to be the IPO of OpenAI and Anthropic. Once those are public companies, they will face even more pressure to disrupt incumbents with moves that would justify higher subscription costs.
For the software names, they will continue to emphasize their moats and proprietary data but it's going to be hard to maintain previous multiples as it's increasingly difficult to see how they will grow their businesses in the future or maintain the multiples they have now.
The broader macro of this is also concerning as companies and their workers get replaced with computer chips and data centers. That kind of disruption will loosen the labor market and could create political turmoil.
That said, no one is going to feel sorry for Intuit. Investigations (notably by ProPublica) found Intuit spent years lobbying to stop the IRS from offering its own free, simple filing system. More recently, Intuit and peers have spent millions lobbying against the IRS “Direct File” program and found a receptive audience in Trump, whose administration said it would kill the free option.
