Anthropic Sparks Yet Another Software Selloff, with Cybersecurity Feeling It the Most

U.S. software stocks fell on Thursday as worries about AI disrupting the industry came back into focus, following a new update from Anthropic. The overall software sector has already been struggling this year, with the iShares Expanded Tech-Software Sector ETF (IGV) down almost 28% year-to-date. Just a day earlier, optimism around a possible U.S.-Iran ceasefire had helped lift markets and push these concerns aside. However, as that truce now looks less certain, investors are once again focusing on how quickly AI is advancing and what it could mean for traditional software companies.

Much of this concern comes from Anthropic’s new AI model, Claude Mythos, which is reportedly powerful enough to uncover hidden weaknesses in existing software systems. Because of the risks, access has been limited to a small group of major companies, including Microsoft (MSFT) and Google (GOOGL). This has led to concerns that current software may be more vulnerable than expected.

It also highlights how quickly AI is improving compared to older systems, which has led some investors to question whether software companies can keep up. These concerns are already affecting stock prices across the sector. Cybersecurity companies are down today, with Zscaler (ZS) falling nearly 11% after a downgrade. Other major software names, including Adobe (ADBE) and Intuit (INTU), also moved lower. In addition, the concern is spreading beyond public markets, as firms like Carlyle Group (CG) are seeing pressure in private credit tied to tech.

Is IGV Stock a Good Buy?

Turning to Wall Street, analysts have a Moderate Buy consensus rating on IGV stock based on 87 Buys, 24 Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average IGV price target of $117.70 per share implies 54% upside potential.