FILE PHOTO: AI (Artificial Intelligence) letters and robot hand are placed on computer motherboard in this illustration created on June 23, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
Feb 5 (Reuters) - Shares of U.S. software and data services companies steadied on Thursday after a bruising selloff earlier this week that was triggered by fears that fast-advancing artificial intelligence tools could upend the sector.
ServiceNow was up 0.1%, Salesforce slipped 0.2%, while Microsoft dropped 1.8% in premarket trading after sharp falls earlier this week. The S&P 500 software and services index has shed more than $800 billion in market value over the past six sessions.
The performance of overseas tech stocks was mixed. Shares in London Stock Exchange Group added 7.7%, while data analytics firms RELX rose 5.2% and the Netherlands-based Wolters Kluwer gained 3.5%.
In contrast, India's software exporters index, which houses names such as HCL Technologies and Wipro, slipped 0.7%, a day after plunging 6% in its worst session in nearly six years.
Thomson Reuters, which suffered a record one-day plunge earlier this week after investors raised concerns that a new plug-in from Anthropic's Claude could disrupt its legal business, gained as much as 4.2% after fourth-quarter results were largely in line with estimates.
The company, which owns the Westlaw legal database and the Reuters news agency, said it was seeing tangible benefits from AI investments.
The market is questioning if the earnings-compounding nature of software companies would get disrupted, said Manish Kabra, London-based lead U.S. equities and multi-asset strategist at Societe Generale.
"At the moment, we have not suggested people to buy software for that reason. I think a lot of cyclical sectors will do better."
The software selloff has come alongside a broader rotation out of technology and into value-oriented sectors such as consumer staples, energy and industrials, which were laggards in the bull market that began in October 2022.
Reflecting the bearish mood, short interest on mid-to-large cap software companies has been rising over the past three months, according to data analytics company Ortex, with cybersecurity and SaaS (Software as a Service) firms seeing the biggest jump in such interest.
Alphabet dropped 4.3% premarket after the Google parent said its capital expenditure could nearly double this year, stoking concerns over payoff from the massive AI investments.
Market volatility has spiked across equities, commodities and digital assets in recent weeks, which market participants attribute to leveraged investors rapidly unwinding positions.
Precious metals gold and silver resumed their slide on Thursday after a historic rout earlier this week, and bitcoin slipped below $70,000 for the first time.
"This is a lot of relative bets out there going wrong, and then there's some kind of reset going on in the market internals, but time will tell," John Hardy, Saxo's global head of macro strategy, said on a podcast.
"There's a lot of leverage in this market. We've reached record leverage in terms of margin lending, etc., so forewarned is forearmed."
(Reporting by Medha Singh in Bengaluru; additional reporting by Vidya Ranganathan in London and Johann M Cherian in Bengaluru; Editing by Tasim Zahid, Anil D'Silva and Shinjini Ganguli)
