Advances in artificial intelligence triggered a global sell-off this week in a variety of technology stocks amid fears of widespread disruption.
It was prompted after AI developer Anthropic launched new plug-ins for its Claude Cowork agent that could automate tasks across legal, sales and marketing teams, and data analysis.
It sparked concerns that AI will disrupt the business models of established firms within those sectors.
Among those caught in the crossfire was Nasdaq-listed Thomson Reuters, the parent company of Reuters News, which initially slumped a record 16% earlier this week on fears that AI could threaten its core legal division.
Other providers of legal analytics services also had their share prices hammered, while other tech services firms such as Salesforce, Adobe and Oracle were hit.
Closer to home, shares in the likes of Vista Group and Gentrack were down 10% and 8.9% respectively over the week (as of writing on Thursday).
Octagon Asset Management chief investment officer Paul Robertshawe told NBR these companies had all relied on building proprietary software that allowed them to grab and hold onto customers.
“It looks like in the last month, people are taking the view that coding is going to become way easier, way cheaper … to copy what’s out there [with these new tools].”
Octagon Asset Management’s Paul Robertshawe.
Although there was a risk that AI advances could break many of these firms’ business models, he said it was too early to say that would definitely be the case.
“When you don’t know the answer, you sort of shoot first and ask questions later.”
He said a similar dynamic played out when the emergence of GLP-1 weight-loss drugs caused people to suspect they would “crush” the likes of Fisher & Paykel Healthcare (FPH) because there would no longer be any people who were overweight and suffered from sleep apnoea.
The pressure on companies such as FPH lasted for about nine months until people realised the drugs were not the panacea many thought they were going to be, and there was going to be underlying demand for the sort of products FPH provided, he said.
Robertshawe also pointed out that technology stocks typically trade at a huge premium to their current earnings, with their valuations largely underpinned by perceptions of their future potential.
When this becomes uncertain, it’s no surprise that share prices will be volatile.
US earnings
The sell-off this week coincided with the US corporate earnings season, which Robertshawe said remained solid and on track for double-digit like-for-like growth in the December quarter.
Among the big names to report was Google’s parent company, Alphabet. Its results, which were released after market close on Wednesday (US time), showed revenue of US$113.8 billion ($190b), which was ahead of Wall Street’s estimate of US$111.4b.
The company said it expected its spending on AI investment to be between US$175b and US$185b in 2026, which would roughly double its capital expenditure in 2025. The company’s shares were down 3% in after-hours trading.
Drug maker Novo Nordisk’s shares plummeted 18% after the company announced its sales and profit growth were likely to decline this year, as it had been hit by lower prices in the US and the loss of exclusivity for its weight-loss drugs in China, Brazil and Canada.
The Danish pharmaceutical company's chief executive, Mike Doustdar, said the company would face pricing headwinds in an increasingly competitive market. “However, we are very encouraged by the promising early uptake from the US launch of [the] Wegovy pill, and we remain confident in our ability to drive volume growth over the coming years.”
Gold and silver have also had rocky weeks.
Precious metal prices have surged amid geopolitical tensions, concerns about debasement of the US dollar and attacks on central bank independence.
But the prices of gold and silver tanked 10% and 28% respectively, following US President Donald Trump’s announcement of Kevin Warsh as his nominee to replace Jerome Powell as Federal Reserve chair. Warsh has been tipped as a policy hawk, and his nomination cooled some fears that he might cut interest rates.
In more recent days, gold and silver have trimmed some of their losses.
Domestic review
A handful of local economic data out this week showed that headline unemployment had risen slightly to 5.4%, building consents had increased, and milk prices had firmed.
On the labour market data, Robertshawe said it fell on the positive side. While the current unemployment rate was above where it was a few years ago, it was well below the levels it reached during the global financial crisis. He said 5.4% was "not a horrific number", given that New Zealand was in a cost-of-living crisis.
The bright spots in the report were that the participation rate and wages had both increased, he said. “We’re not really in a recovery yet. It’s just starting, and people will delay hiring until they have banked a few profits after the tough times.”
Dual-listed Ryman Healthcare also announced a new dividend policy, strategy and capital management framework at its investor day.
The retirement village provider expects to resume dividends, which have been paused since FY23, in FY28. It also expects to achieve $150m in cash flow from existing operations by FY29, and to release $500m of cash from the business by then.
The change comes after a bitter few years for the company, which has seen a massive destruction of shareholder value.
Robertshawe, who attended the event, said he had a lot more confidence in the board and management, and that everything they were doing made sense, although it would take a long time for the changes they had announced to flow through.
