Fears of an Artificial Intelligence (AI) apocalypse were once the stuff of science fiction. Now, investors are contemplating whether the launch of powerful new AI tools from Anthropic, one of the world’s leading AI startups, will lead to the extinction of many well-established companies and sectors in the knowledge economy.
The new functionality for Anthropic’s Claude Cowork AI agent are being seen as a major step forward in the capabilities of agentic AI. This class of solutions can execute more complex tasks, like those a software developer or analyst does, and operate more autonomously than chatbots that await instructions before acting.
Traders and analysts were quick to identify this as a threat to traditional software vendors such as Microsoft and SAP. The thinking is that if agentic AI can execute complex professional workflows that software providers package and sell to enterprises, demand for traditional software could rapidly decline.
The S&P 500 Software & Services Index fell more than 4% in a single session in late January and is down around 20.8% year to date. Names such as Microsoft (down around 17% for the year so far) and ServiceNow (down about 32.6%) have taken strain – dragging the S&P 500 and Nasdaq composites down with them.
More recently, the panic has spread to a wide range of sectors where knowledge work is a core component of the offering. Business consulting firms, research companies, wealth managers, legal practices, insurance brokerages, and other service-intensive industries are taking pain.
The logic behind the selloff is that these firms will face threats to their profitability and even their existence in a world where AI agents can do work like legal research, software development and dispensing bespoke business advice. What happens to companies that charge high fees for services if a platform like Claude can offer them for $20 a month?
Along with the flight from these sectors, investors are rotating into sectors that are seen as more AI-resistant. Residential construction-related stocks, consumer staples and chemicals have come into favour in recent weeks as potential defensive plays in an increasingly tech-disrupted world.
Our view is that the scale and speed of the market reaction may well be overdone. We do not believe that AI agents will be able to replace complex enterprise software solutions or big-ticket professional services overnight. Large organisations have invested heavily in their existing systems and moving to new agentic platforms would potentially take them years.
Switching costs, regulatory requirements and institutional inertia will all be significant barriers to widespread adoption of agentic AI. It is especially important to remember that generative AI platforms like Claude and ChatGPT still “hallucinate” or make mistakes. Human judgment and oversight will remain critical for years to come. Plus, existing companies could benefit from plugging agentic workflows into their products and businesses.
We see echoes of the dotcom era, when pundits wrote obituaries for banks and retailers. In reality, many incumbents adapted to a digital world and survived. Likewise, enterprise resource planning systems did not eliminate finance professionals, nor did customer relationship management platforms make sales teams obsolete.
As such, the potential for disruption is real, but the current fears may be overstated. While automation and digitalisation have changed the way companies operate since the start of the computer era, they have not erased entire sectors overnight. Likewise, AI is likely to be a long-term transformation that will not impact all sectors in a uniform way.
It is also worth considering that we may simply be seeing a broader market re-rating. Some stocks and sectors that were richly valued on AI optimism may be adjusting to more sober expectations. At the same time, areas that were underappreciated might be benefiting from renewed attention.
We are as yet in the early stages of the AI revolution. AI products are not yet generating substantial revenues relative to the scale of global professional services or enterprise software spending. Major players such as OpenAI and Anthropic are still in heavy investment mode and few of them are profitable or publicly traded.
The eventual winners remain uncertain, but, in the longer term, we believe AI will produce enhanced returns for well managed companies and their investors. Firms across sectors are likely to reap efficiency gains from AI and even create new business models and revenue streams. This includes many of the software and services companies that are currently under pressure.
Semiconductor designers and data centre operators will probably continue to capture demand tied to the AI infrastructure boom even as investors worry about elevated valuations. But the concerns about the timelines for returns from hundreds of billions of dollars AI companies are investing in infrastructure and their debt exposure are valid.
For investors, the key question is not whether AI will transform the economy, but how and over what timeframe. We believe it is wise to tune out the short-term noise and focus on the longer view. The selloff in 2025 linked to DeepSeek is now largely forgotten – a reminder of how quickly narratives can shift in a volatile market.
Our view is that tracking broad market indices rather than betting on individual outcomes still has a place as it allows investors to capture gains wherever they emerge, whether in software, semiconductors, construction, or consumer staples, whilst avoiding concentration risk to single sectors or themes.
“We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.”
– Roy Amara, American researcher, scientist and futurist
“There’s this notion that the software industry is in decline and will be replaced by AI. It is the most illogical thing in the world.”
– Nvidia CEO Jensen Huang
Global News
- AI is disrupting markets by creating big winners while exposing vulnerable business models to sharp selloffs, Bloomberg reported on Wednesday. Investor anxiety flared after a new AI tool that automates financial planning and tax strategies sparked fears of disruption, showing how quickly automation can undercut traditional business models and triggering sharp share price declines in companies seen as exposed to disruption. Real estate stocks also fell amid concerns that AI-driven shifts in work patterns could weaken office demand and pressure valuations. The sell-off spread to logistics stocks yesterday, with transport and freight firms flagged as potential casualties of AI-driven efficiency gains. At the same time, companies building or adopting AI tools continue to attract capital as investors bet that the hundreds of billions of dollars flowing into AI will drive productivity gains, new products, and long-term growth.
- Gold fell sharply on Thursday as fears around AI triggered a broad risk-off move across markets and forced investors to cut positions. Spot gold dropped as much as 4.1% and closed 2.8% lower, while silver plunged 9.2%% and copper slipped 2.2% on the London Metal Exchange. Analysts said the selloff had no single trigger and was driven by algorithmic trading, margin calls, and profit-taking after gold and silver’s strong rally since 2024. Despite the volatility, major banks expect gold to resume its upward trend, arguing that the drivers behind earlier gains remain intact, including geopolitical tensions and a broader shift away from traditional assets.
- US payrolls rose in January by the most in over a year, while the unemployment rate unexpectedly fell, signalling labour market stabilisation at the start of 2026. Employers added 130,000 jobs last month, and unemployment declined to 4.3%, according to Bureau of Labor Statistics data released on Wednesday. The gains followed revisions showing that the nation added 181,000 jobs in 2025. The data pointed to improving conditions after one of the weakest non-recession hiring years since 2003, though economists expect growth to remain subdued in 2026.
- Fed Governor Stephen Miran said on Monday at Boston University that US President Donald Trump’s trade tariffs have had a benign economic impact and are largely borne by foreign firms, not Americans. Miran argued that views have shifted since early fears at the start of Trump’s second term. However, a study by economists at the Federal Reserve Bank of New York published yesterday found that nearly 90% of the economic burden from tariffs in 2025 was borne by US companies and consumers.
- Trump’s tariff agenda faced its strongest political setback as the Republican-led House passed legislation to end levies on Canadian imports on Wednesday. The vote increases pressure ahead of midterm elections, forcing swing-district Republicans to weigh opposing the President. Though Trump is expected to veto the bill, defections from six Republicans and near-unified Democratic opposition highlight his fragile grip on the narrow House majority.
- French President Emmanuel Macron on Tuesday warned that Europe should prepare for further hostility from the US, describing the recent “Greenland moment” as a wake-up call. Macron said the Trump administration was “openly anti-European” and accused it of seeking the European Union’s “dismemberment”. He urged leaders meeting in Belgium this week to accelerate economic reforms and renewed his call for expanded common EU borrowing.
- Japanese PM Sanae Takaichi secured a decisive election victory on Sunday, winning 352 of 465 lower-house seats, strengthening her mandate to expand defence capabilities despite criticism from China. Takaichi said she would push ahead with plans to bolster military deterrence amid tensions over Taiwan. Former US diplomat Kevin Maher said the result could reinforce her hawkish stance. China’s foreign ministry on Monday again urged Takaichi to withdraw her remarks on Taiwan and said its policy toward Japan would not be changed by a single election.
- British PM Keir Starmer refused calls to resign on Monday after his appointment of Peter Mandelson as US ambassador triggered a political crisis. The controversy centred on Mandelson’s past links to convicted sex trafficker Jeffrey Epstein. Communications chief Tim Allan’s resignation followed the exit of Starmer’s closest aide, Morgan McSweeney, who took responsibility for advising on Mandelson’s appointment.
- Alphabet issued a rare 100-year bond on Tuesday as part of a $31.51 billion global bond raise, marking the technology sector’s first century bond since Motorola’s 1997 issuance. The Google parent sold £5.5 billion ($7.51 billion) in sterling bonds across five tranches, with the 100-year portion raising £1 billion ($1.4 billion) at a 6.125% coupon and drawing demand nearly ten times the amount offered. The bond offering comes as the company raises money to fund an AI-driven spending surge. Analysts noted the debt lacks restrictive covenants.
- Apple’s planned Siri upgrade has hit testing delays, potentially pushing back key AI-driven features. The enhancements, initially expected with iOS 26.4 in March, may now be staggered across later updates, including iOS 26.5 in May and iOS 27 in September. Testing revealed issues with query processing and response times. Apple said plans remain fluid and declined to comment. Shares trimmed gains on Wednesday, rising 1.1% in New York after earlier advancing as much as 2.4%.
- Novo Nordisk on Tuesday opened a new legal front against copies of its weight-loss drug Wegovy by filing its first US patent infringement lawsuit against Hims & Hers, seeking damages and a permanent ban on sales of compounded versions after the FDA declared the shortage of semaglutide had ended. The case follows Hims’s brief launch of a $49 compounded product and signals a tougher stance by Novo as telehealth firms and compounding pharmacies move into the fast-growing obesity drug market, with legal experts saying the end of the shortage strengthens Novo’s ability to enforce its patents.
- As at Thursday’s close the S&P 500 was down 0.4% for the week.
Local News
- President Cyril Ramaphosa last night set out a forward reform drive to boost growth, investment, and state efficiency in his State of the Nation Address. He said electricity transmission will be opened to private firms from this year, major infrastructure projects will be fast-tracked, and a new company will be created to manage the state’s property portfolio. Ramaphosa pledged tougher action on crime, including deploying the army and recruiting 5,500 more police officers, and committed R156 billion over three years to water and sanitation. He also said the national cattle herd will receive 28 million doses of a vaccine against foot-and-mouth disease, while warning that high unemployment and failing municipalities remain urgent priorities.
- South Africa will also review its tariff policy to protect vulnerable industries and mitigate risks from escalating global trade tensions, as pressure mounts from renewed US tariffs under Trump. Ramaphosa said the government is working with business and labour to close loopholes in the tariff system and support sectors such as steel, automotive, and ferrochrome, while also positioning the economy for growth in agriculture, mining, services, and the green economy. Ramaphosa’s remarks signal a potential shift in trade policy in response to external pressures and domestic economic priorities.
- The International Monetary Fund (IMF) said on Wednesday that South Africa’s outlook remains vulnerable to weaker global growth, rising protectionism, and policy uncertainty. These risks could reduce export demand and increase commodity price volatility. The IMF expects South Africa’s GDP growth to reach 1.3% in 2025 and 1.4% in 2026, up from earlier projections of 1.1% and 1.2%, respectively, and rise gradually to 1.8% by the end of the decade. With a 3% inflation target in place, inflation is expected to ease to 3.3% in 2025, 3.6% in 2026, and settle at 3% from end-2027. It said weak infrastructure, market rigidities, and high public debt could undermine confidence. The IMF also urged deep spending reforms, warning that debt could rise from 77% of GDP in 2025 to about 84% by 2031, despite a 1.5% of GDP primary surplus target in 2026.
- South Africa is positioned for further sovereign credit-rating upgrades over the next 24 months, Standard Bank’s chief economist Goolam Ballim said on Tuesday, building on last year’s S&P Global Ratings upgrade that lifted the foreign-currency long-term rating to “BB” from “BB-,” while Bank of America sees potential upgrades from Moody’s and Fitch. He said real income is growing between 2% and 3%, employment is above pre-pandemic levels, and interest-rate relief of up to 0.75 percentage points could support credit growth. However, he warned that political fragmentation ahead of municipal elections and infrastructure constraints in electricity and water remain key risks to the outlook.
- Ramaphosa yesterday overruled Eskom’s revised breakup plan, rejecting a proposal to keep the transmission business under Eskom and confirming that the National Transmission Company of South Africa will be fully independent. The move reverses Electricity Minister Kgosientsho Ramokgopa’s plan and aligns with the original reform goal of separating generation, transmission and distribution. The decision follows pressure from business groups and investors who warned the earlier proposal could deter investment and weaken competition in the power sector.
- The Financial Sector Conduct Authority’s Consumer Advisory Panel on Tuesday published its first annual report, outlining priorities around digital finance, data use, and consumer-focused regulation. The report detailed the panel’s operational progress and flagged issues, including financial influencers, AI in finance, access to and cost of banking and payment services, and consumer education effectiveness. It said digital transformation is increasingly shaping regulatory strategy, bringing both expanded access and new risks such as cyber threats, algorithmic bias, misinformation, and digital exclusion.
- Capitec Bank said yesterday its profit for the 2026 financial year could reach about R17 billion, roughly matching Nedbank’s recent R16.9 billion headline earnings, as full-year earnings are expected to grow by 20% to 25% from R13.7 billion the prior year, underscoring the bank’s rapid growth. The Stellenbosch-based lender said increased client numbers, higher transaction volumes, and a stronger macroeconomic environment boosted lending and net insurance income, while parent group Capitec surpassed a R500 billion valuation, making it one of the fastest South African companies to hit that mark. The bank’s business banking unit has also expanded rapidly, with 182 000 clients, up 57 % in six months, positioning Capitec to rival larger peers as it continues to grow.
- Harith General Partners has agreed to acquire FlySafair, South Africa’s largest low-cost airline, in a deal that will expand its transport infrastructure portfolio upon regulatory approval. The investment builds on Harith’s existing assets, including City Power and the Gautrain, and reflects confidence in the recovery of domestic air travel and FlySafair’s strong performance. Financial terms were not disclosed, though the deal will be funded through equity and debt.
- More than 1 million wealthy, well-educated South Africans now live abroad, driven mainly by crime, insecurity, and concerns about their children’s futures, according to the South African Diaspora Report 2026 released on Wednesday. Nearly half of 1,500 respondents in 73 countries cited safety fears as their main reason for leaving a country with one of the world’s highest homicide rates and where only one in 10 cases is solved. About 90% of respondents hold tertiary qualifications, and 60% hold postgraduate degrees. Most earn more than R1.6 million a year, compared with an average household income of R204,359 in 2023. Fewer than a quarter plan to return, and the trend is set to continue, with 90% of South African students saying they want to work overseas.
- As at the time of writing, the rand was flat against the dollar, and the ALSI was 0.7% up for the week.
Sources: Dynasty, BusinessTech, Business Day, CNN, Business Report, Reuters, Bloomberg, Washington Post, etc.
