AI Fears Trigger Sell-Off in US Software and Private Capital Markets

US software stocks experienced a significant sell-off on Monday, February 23, 2026, as investor concerns mount over the potential disruptive impact of artificial intelligence (AI) on the industry. The downturn extended to private capital groups heavily invested in technology companies, signaling broader market anxieties.

Market Performance

The S&P 500 index closed down 1 percent, although the Nasdaq Composite, heavily weighted towards technology, fell 1.1 percent. Several prominent software companies bore the brunt of the selling pressure:

• Workday: Down 6 percent
• CrowdStrike: Down 10 percent
• Datadog: Down 11 percent
• Salesforce, ServiceNow, and Oracle: Each down approximately 4 percent
• IBM: Plunged 13 percent, marking its largest single-day decline since 2000

Executive Concerns and Private Capital Impact

The sell-off followed comments from Jenny Johnson, CEO of Franklin Templeton, who questioned the long-term viability of enterprise software companies in the face of commoditization driven by modern AI models Financial Times.

US private capital firms, which have substantial exposure to software companies through both equity investments and loans, were also affected. Ares, Apollo, and Blackstone each fell by at least 5 percent, while KKR lost 9 percent. Blue Owl, which recently halted investor withdrawals from one of its funds, slid 3 percent, bringing its year-to-date decline to around 30 percent. Software accounted for roughly 18 percent of US private equity deal value in 2025, according to data from PitchBook.

AI-Driven Disruption and Investor Sentiment

The recent declines are linked to the release of new coding tools by AI start-up Anthropic earlier in February. Investors have reacted strongly to both formal announcements and informal discussions, including a widely circulated blog post suggesting AI could drive US unemployment above 10 percent by 2028 Financial Times.

UBS analysts, led by Samantha Meadows, highlighted that coding is the first domain where AI demonstrably outperforms humans at scale, making the software sector particularly vulnerable. They also noted the highest disruption risk lies in leveraged loans and private credit, where tech holdings are significant Financial Times.

Shifting Investor Behavior

Redemptions from private debt funds, popular among high-net-worth investors, increased to an average of 4.4 percent of net assets in the fourth quarter of 2025, up from 1.6 percent in the previous quarter, according to Fitch Ratings. Investors are shifting towards defensive positions, with the communications sector, known for its consistent dividends, being one of the few gainers on Monday.

Broader Market Trends

Selling pressure also extended to large US banks, including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo, each falling around 4 percent. US government debt prices rose, pushing yields down, with the 10-year Treasury yield falling to 4.04 percent. Gold, a traditional safe-haven asset, rallied 2.5 percent to $5,230 a troy ounce.