Market Update: Software sell-off over AI fears hits global stock markets, but FTSE 100 hits record on £8bn insurance takeover – business live

Market Update: We break down the business implications, market impact, and expert insights related to Market Update: Software sell-off over AI fears hits global stock markets, but FTSE 100 hits record on £8bn insurance takeover – business live | Business – Full Analysis.

Introduction: Software selloff goes global amid AI fears

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

A selloff in software and data company stocks that began in Europe yesterday has spread to Asia-Pacific markets, via the US, today.

Software stocks slid from India to Japan, following losses on Wall Street overnight, on growing concerns that their business models will be devoured by AI.

The trigger for the selloff appears to be an updated chatbot release from AI developer Anthropic, the company behind the chatbot Claude, designed to automate legal work such as contract reviewing, non-disclosure agreement triage, compliance workflows, legal briefings and templated responses.

The news had an immediate impact in London yesterday, where information and analytics company Relx plunged 14%, UK publishing group Pearson fell by nearly 8%, and the London Stock Exchange Group fell by 13%.

There’s was a knock-on effect since. Last night in New York, Salesforce, Datadog and Adobe lost about 7%, Synopsys and Atlassian fell about 8%, and Intuit slumped 11%, as investors anticipated that their business models could be disrupted by AI.

And now the selloff has swept around the globe. Shares of Indian information technology firm bellwether Tata Consultancy Services are down 6.8%, while Infosys has lost more than 8%.

Chinese software companies dropped too, with Kingdee International Software down 12.5%.

In Japan, economics data firm Nomura Research Institute fell 8%.

The selloff has rattled markets that had only just recovered from the slump in gold and silver last week.

Ipek Ozkardeskaya, senior analyst at Swissquote, says:

The relief that came with the easing selloff across the metals space lasted until news broke that Anthropic, an AI startup backed by Amazon and Google, had rolled out a new AI tool designed to handle legal and research work traditionally done using paid databases.

The announcement spooked markets, triggering a sharp selloff in software companies that sell data analytics and decision-making tools to lawyers, banks and corporates, on fears that AI and new players are coming for their lunch — and at an accelerated pace.

The agenda

9am GMT: Eurozone services PMI report for January
9.30am GMT: UK services PMI report for January
10am GMT: Eurozone inflation report for January
10am GMT: House of Lords inquiry on stablecoins in the UK to hear evidence
1.15pm GMT: ADP US private payroll report for January
3pm GMT: US services PMI report for January

Key events

This week’s software selloff feels like a ‘fire sale’, says Saxo Markets’ UK investor strategist Neil Wilson.

He says investors are struggling to value such companies, as AI disruption looms:

The sell software trade dominated the narrative on Tuesday in the US. IT research firm Gartner plunged -20% and hit a 52-week low after its full-year guidance missed expectations, and it was caught up in the broader selloff. Adobe slumped –7.31%, Salesforce –6.84%. This was carnage for these stocks. S&P Global, Intuit, Equifax and Moody’s were all down sharply too and it had the feel of a fire sale because investors just no longer have any visibility or confidence in their models. S&P 500 software stocks are now –25% YTD and is at its lowest level since April…this is all about the growing dispersion in the AI trade. We don’t know who’s going to win or lose, and we don’t yet know really how useful some of these tools are, but we reckon a lot of these firms are going to struggle to generate margin as AI will compress and compete away competitive advantage. To make a general point, there are clearly bargains with some of these names as some will be winners, but investors are turning backs because they are saying ‘we don’t know how to price these stocks’.

This is not happening in isolation – software giants like these are totally wrapped up in the AI trade even if they are suffering because of the technological shifts. Software companies are customers of the likes of Amazon, Microsoft. In turn, they are the major customers of Nvidia, Broadcom, and in turn TSMC etc and so it goes on. So, we had a broader read across from the software hit with MSFT –2.87%, NVDA – 2.84%, AMZN –1.79%, META –2.08%.

Insurance takeover helps FTSE 100 to new record

Zurich’s improved takeover offer for rival insurer Beazley (see earlier post) has driven the London stock exchange to a new record high.

Beazley’s shares are leading the FTSE 100 risers, up 8.6%, helping to push the Footsie over yesterday’s high to a new peak of 10,383 points.

Beazley’s shares have hit a new record of £12.63 each, lifting the company’s valuation to £7.6bn.

That’s still below Zurich’s new ‘agreement in principle’ on a potential cash offer worth 1,310 pence in cash, though, even though Beazley’s board say they’re ‘minded’ to recommend it, should a firm offer be made.

The FTSE 100 will also be benefiting from the rotation out of software stocks and into other sectors.

Oil companies are also ralling, with BP up 2.3% and Shell rising 1.7%, as the oil price rises.

Novo Nordisk shares tumble after 2026 forecasts shock investors

Eek! Shares in Danish pharmaceuticals firm Novo Nordisk have plunged 18% at the start of trading, after it shocked investors last night with unexpectedly poor financial guidance.

After Europe’s stock markets closed on Tuesday, Novo produced a stinker of a financial report – predicting its profits and sales could drop as much as 13% this year, the first declines in years.

Novo, maker of Ozempic and Wegovy, blamed the “Most Favoured Nations” agreement in the US which forced drugmakers to cut their prices, alongside increased competition in the weight loss sector and expiring patents.

Novo Nordisk CEO Mike Doustdar has told reporters this morning that the price reductions for its obesity drug Wegovy in the U.S. are “painful” for the company’s financial results.

Doustdar argues that they could be an investment in the future, as many more people will be able to get access to the medicines as a result.

Derren Nathan, head of equity research at Hargreaves Lansdown, says:

“Novo Nordisk resorted to one of the oldest tricks in the books yesterday evening by trying to sneak out bad news when nobody was watching. But when you’re Europe’s biggest Pharmaceutical company and one of HL’s five shares to watch for 2026, there’s no place to hide. 2025’s number contained no major surprises. Slightly better than expected sales, despite lower than expected pricing, led to an operating result in line with consensus, even as the company ploughed 3% more than forecast into its development programs. On the face of it, 2026 guidance was positive too, but much of that was down to anticipated accounting adjustments.

Underlying guidance (a new and welcome initiative for the company) was for sales and operating profit to fall 5-13% this year, causing the immediate erasing of much of the shares’ strong gains so far in 2026. Donald Trump’s crusade on drug prices, patent expiration, and competition all had their part to play. It wasn’t all bad news, with an extremely strong launch for the Wegovy pill, and a reminder of strong clinical progress in the next-generation pipeline at the tail-end of 2025. But CEO Maziar Doustdar faces some tough questions when he takes the podium in his first full-year earnings call later today, particularly if arch rival Eli Lilly’s results, due before Wall Street’s open, paint a different picture. The hope will be that unlike his predecessor, he’s getting all his bad news out of the way at the beginning of the year.”

London-listed companies exposed to Anthropic’s new legal plug-in are under a little more pressure at the start of trading.

The London Stock Exchange Group are down another 1.1% (after falling 13% yesterday), while Relx are down 0.5% (after Monday’s 14% drop).

Yesterday’s software sell-off marked “a dramatic acceleration” of the recent trend, says market strategist Jim Reid of Deutsche Bank, adding:

It means the 9 worst-performing companies in the S&P 500 YTD are all in the software and related services sectors, having now seen declines of 25% or more.

While the question over the end-winners from AI is unlikely to be answered in 2026, recent months have seen a clear shift in markets from AI euphoria towards more differentiation between companies, and growing concern about its disruption to existing business models.

Zurich and Beazley reach initial agreement on £8bn deal

In the insurance world, Zurich appears to have won its battle to aquire smaller rival Beazley after increasing its offer price.

The two companies have told the City this morning they’ve reached “agreement in principle” on the key financial terms of a possible recommended cash offer, which values Beazley at £8bn.

At 1,310 pence in cash plus a 25p dividend, that’s almost 60% higher than Beazley’s closing share price on 16 January, the last business day before Zurich’s interest was public.

Zurich had earlier offered 1,280p a share, but has now bumped it up.

Beazley’s board says it would be minded to recommend the new offer to shareholders, should a firm bid be made – once Zurich has completed its due diligence on the bid.

Beazley offers specialist insurance products, across areas including cyber, professional indemnity, property, marine, and reinsurance, and had batted away several previous wooings from Zurich.

Nvidia’s Huang dismisses fears AI will replace software tools

Nvidia CEO Jensen Huang has dismissed fears that artificial intelligence will replace software and related tools, calling the idea “illogical”.

Speaking at an artificial intelligence summit in San Francisco hosted by Cisco Systems, Huang said worries that AI will make software companies less relevant are misguided and AI will continue to rely on existing software rather than rebuild basic tools from scratch, Reuters reports.

Huang said.

“There’s this notion that the tool in the software industry is in decline, and will be replaced by AI … It is the most illogical thing in the world, and time will prove itself,”

“If you were a human or robot, artificial, general robotics, would you use tools or reinvent tools? The answer, obviously, is to use tools … That’s why the latest breakthroughs in AI are about tool use, because the tools are designed to be explicit.”