Explained: How Claude Cowork Sparked a Software and IT Stock Sell-Off in India and US

The shares of publicly traded software and IT services companies in India and the US took a nosedive after Anthropic announced Claude Cowork, an artificial intelligence (AI) automation product for enterprises. As per reports, the markets in both countries came under pressure this week after new automation plug-ins for the platform were released. It is said that investors raised concerns about AI replacing the offerings of these companies. The potential layoffs and reduced demand for traditional IT services were reportedly highlighted, particularly in areas such as software development, business process outsourcing, and enterprise automation.

What Is Claude Code

Anthropic announced Claude Cowork on January 16 and released new automation plug-ins on January 30. It is an enterprise-focused AI workspace that allows organisations to automate complex, multi-step work to an AI system rather than using it only for chatbot-based tasks or coding. It is currently available to Pro subscribers, as well as Team and Enterprise plans, in research preview.

A key part of the latest update is the addition of Cowork plug-ins. According to Anthropic, these plug-ins allow Claude to connect directly to enterprise software such as code repositories, internal documentation systems, spreadsheets, ticketing platforms, and other workplace tools. With plug-ins enabled, Claude can reportedly write and review code, analyse internal documents, update dashboards, respond to tickets, and automate routine workflows that are common in IT services and enterprise operations.

Anthropic positions Cowork as a collaborative system meant to work alongside teams, but the ability to execute tasks end-to-end has drawn attention from both customers and investors.

How Did the Markets React

According to a Reuters report, Indian IT stocks fell sharply following the Cowork update, with investors expressing concern about the long-term demand outlook for labour-intensive technology services. Shares of several large Indian IT firms declined as the market reacted to the possibility that AI automation could reduce staffing requirements across global clients.

The Indian IT sub‑index was reportedly on track for its worst day since March 2020, and all 10 companies were noted to be trading in the red. The report added that Infosys witnessed the biggest loss with a decline of 7.3 percent.

In the US, The Wall Street Journal reported that the impact extended to software companies and private fund managers with exposure to enterprise technology. The publication said valuations in parts of the software and IT services ecosystem came under pressure as investors reassessed growth assumptions in light of increasingly capable AI tools.

The report mentioned that the market crash first impacted companies that offered legal tools or research-based software on Tuesday, but later in the day, the impact spread to the larger software industry, including PayPal, Expedia Group, EPAM Systems, Equifax, and Intuit, all of which witnessed a share drop of 10 percent or more. WSJ claimed, citing S&P indexes, that the crash wiped out the market value of around $300 billion (roughly Rs. 27.14 lakh crore).

What Triggered the Crash?

As per the reports, the immediate trigger was not the availability of Cowork itself, which remains in a limited rollout, but the signal it sent about the pace of AI adoption. Investors reportedly focused on how quickly AI systems are evolving from productivity aids into systems that can independently execute work across software environments, rendering traditional systems inefficient and costly.

Some of the reasons mentioned in the report include the uncertainty around future pricing power and headcount needs in IT services. The concern, reportedly, is that if enterprises can rely more heavily on AI systems like Cowork, they may scale back spending on outsourced development, support, and process management.

AI Automation a Death Sentence to Software Companies and IT Firms?

In recent times, multiple global companies have conducted large-scale layoffs to facilitate AI-led restructuring, essentially reducing headcounts and automating manual and repetitive tasks. However, with tools such as Claude Cowork, the threat is not just to employees but also to companies themselves, whose offerings could be undesired if an AI system can replace them.

These are still early days, and it appears that the market reaction was largely a state of panic and not a reflection of the current scenario. It is important to note that Anthropic's automation tool is only available as a research preview, which means it cannot handle tasks for large companies and cannot perform tasks as reliably as legacy software and IT services companies can.

While a transition seems near inevitable in the long run, how companies react will also matter. For instance, many believed companies such as Adobe and Canva would see a mass exodus of users once AI learned how to generate and edit images and videos. However, both companies integrated AI features to consolidate their position in the market even further.