Last week, the release of an AI tool for legal automation by Anthropic triggered a significant stock market selloff. Investors reacted to fears that the technology could disrupt major software clients across the legal and financialsectors, according to a Reuters report. This event underscores the substantial influence AI now holds over financialmarkets.

The market reaction was swift. The S&P 500 software and services index dropped nearly 9% over five trading daysand is now down over 20% from its October peak. The Nasdaq 100 also declined by approximately 2.6%.

The source of the disruption is a new "Legal" plugin for Anthropic's Claude Cowork AI agent. The company statesthe tool can accelerate and automate tasks like contract review, NDA processing, and compliance checks, all whilebeing customizable to a firm's specific guidelines. Anthropic explicitly cautions that its outputs are not legal adviceand must be reviewed by qualified attorneys.

Despite this disclaimer, the announcement was perceived as a competitive threat. Morgan Stanley analysts notedthe launch "heighten[ed] competition" in the legal software space, viewing it as a "potential negative" forincumbents.

However, significant skepticism remains about the real-world efficacy of such AI agents. An MIT study found nomeaningful revenue increase from AI integration, and analysts note a lack of clear productivity gains. In the legalfield specifically, AI tools have a problematic track record, including instances of fabricated case law that havelanded lawyers in trouble with judges.

As JP Morgan analyst Mark Murphy told Reuters, expecting a single productivity plugin to replace complex, mission-critical enterprise software is an "illogical leap."

Nevertheless, the episode makes one thing clear: the mere potential of AI is now powerful enough to send tremorsthrough the global markets.