Software stocks have been plunging fiercely to start 2026. The culprit? Artificial intelligence (“AI”) companies, especially Anthropic. Investors are running scared as Anthropic announces AI agents, which they fear can disrupt enterprise software companies and threaten their huge margins.
The fear is that new, AI-based products could deliver a software product at vastly reduced cost. If the move is successful, software companies – where the key assets are coders and their code, reinforced by high switching costs that “lock in” clients – could be left with little of value.
Investors are funding the AI push with tens of billions of dollars directly to companies such as Anthropic, the maker of the Claude chatbot, and OpenAI, the name behind ChatGPT.
Big players such as Microsoft (MSFT), Amazon (AMZN), and Meta Platforms (META) are also pouring gobs of money into AI via data centers or investments in AI firms like Anthropic.
These three players and Alphabet (GOOG) (GOOGL) – the hyperscalers – are boosting capital spending by an estimated 71% in 2026 to an unbelievable $650 billion… again, those four firms alone.
So, lots of players are betting big that Anthropic and its ilk can disrupt major industries.
But beyond the threat to software, Anthropic also poses another peril… to its own investors. It’s burning billions in cash. It recently stated that its inference costs had surged 23% more than expected in 2025. The rise torched 10 percentage points in gross margin, lowering it to 40%.
Anthropic is expanding operations so fast that it may not be able to grow revenue fast enough to keep up, warns co-founder and CEO Dario Amodei. It’s a surprising comment for a company that is growing sales at breakneck levels already… and it may still not be enough.
So, perhaps it’s not surprising that Anthropic has inspired a kind of paradoxical reaction in the stock market – the greed for unimaginable upside paired with the fear of substantial risk.
Here’s what Anthropic has been doing recently to keep investors excited about its business.
Anthropic Rolls Out AI Productivity Tools
Investors have been seriously fretting about Anthropic’s rollout of tools utilizing its AI capabilities. Anthropic focuses on coding, building tools for enterprises to increase white-collar productivity.
Over the past month or so, whenever the AI firm announced a new tool, relevant software stocks and those in related sectors plunged.
- A legal plug-in: This tool for the Claude Cowork AI agent can review legal documents, track compliance tasks, automate contract review, and more.
- Claude Code Security: This feature scans software for security-related concerns, suggests software patches, and finds vulnerabilities.
- Code modernization: Anthropic highlighted the ability of Claude to modernize older software code, such as COBOL, which still runs many legacy systems.
- Specialized tools: More specialized plug-ins for specific sectors, such as financial analysis or human resources, are also available.
As Anthropic publicized these features, the stocks in related industries – legal software, security software, and smaller Software-as-a-Service firms – sold off hard.
Many software stocks have lost 30%, 40%, or even 50% since the start of the year. These double-digit declines left many investors and analysts stunned.
The thrashing has sent the iShares Expanded Tech-Software Sector Fund (IGV), an exchange-traded fund focused on major software companies, down 22.8% since the start of 2026 (as of February 27).
Anthropic is also partnering with major software platforms to make its productivity tools available on platforms including Slack, DocuSign (DOCU), and LegalZoom (LZ), among others.
In some cases, it looks less like wholesale disruption than it does a rollout of tools that help workers become more productive and software firms become more valuable to their clients.
But even if you think the reaction is overblown for now, investors are forward-looking. They’re thinking about what Anthropic or another AI company may develop later on. As money continues to pour in, the tools will keep getting better because the incentive is there for it to happen.
However, the downturn has led many investors to go looking for bargains… software companies that may actually thrive due to the rollout of AI or simply bounce back in the short term.
Is Anthropic Growing Fast Enough?
While investors run around worrying about Anthropic eating someone else’s lunch, Anthropic is dealing with its own literal growing pains, which are substantial – maybe even existential.
Amid all the AI infrastructure build-out, revenue is rising, but will it grow fast enough for the firms making these massive investments today and next year to produce growth in later years?
“How many years after that do the trillions in revenue start rolling in? I don’t think it’s guaranteed that it’s going to be immediate. I think it could be one year. It could be two years. I could even stretch it to five years, although I’m skeptical of that,” said CEO Amodei.
But if that revenue growth doesn’t arrive in time, he says, the cash burn may simply be too great.
“If I’m just off by a year in that rate of growth, or if the growth rate is 5 times a year instead of 10 times a year, then you go bankrupt,” says Amodei.
It’s not like Anthropic’s results and projections for annual run-rate revenue (“ARR”) are not ambitious.
- 2025: $10 billion in ARR
- 2026: $20 to $26 billion in ARR
- 2028:Up to $70 billion in ARR
As of early 2026, the company has said that its run-rate revenue is $14 billion. That growth has whetted investors’ appetites, but it’s required an incredible investment to set the stage.
Anthropic Exploring IPO in 2026
Anthropic has reportedly been exploring an IPO this year, and the move might allow it to raise a bundle of funds to turbocharge its expansion. An Anthropic IPO would rank among the largest IPOs of all time as investors rush to get a piece of the AI action.
The company has been exploring the possibility with legal counsel, and has also started negotiations with investment banks.
One key issue with any IPO is the company’s path to profitability. Investors need to believe that a company can achieve sustained profits before they’ll be willing to put up their cash. This belief may be more challenged lately, however.
Anthropic had been expected to burn about $2.8 billion in cash in 2025. However, the company trimmed estimates for profit margins in its 2025 results. The company’s computing costs have surged much more than expected, a problem that may not be resolved soon.
Previously, Anthropic had been targeting a break-even point in 2028, ahead of rival OpenAI, which is burning cash at an even more furious clip and may not break even until the 2030s.
The pre-IPO valuation on Anthropic has been surging during recent funding rounds as investors’ appetites for all things AI have been whetted:
- November 2024: Raised $4 billion at a $40 billion valuation
- March 2025: Raised $3.5 billion at a $61.5 billion valuation
- September 2025: Raised $13 billion at a $183 billion valuation
- February 2026: Raised $30 billion at a $380 billion valuation
That’s an unbelievable increase in valuation – up 850% – in just 15 months or so.
If Anthropic can get the economics solved, an IPO is just a question of when, not if. It could well be the hottest IPO in more than a decade. And other AI-related IPOs may be right behind it.
Regards,
James Royal
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