Good morning, investors. The Nasdaq just capped off its worst two-day stretch since October.
Wall Street is suddenly concerned that a long-standing and steady corner of the market is no longer going to be the winning bet it once was.
SaaS-pocalypse
Wall Street has become so bullish on AI that it’s made investors bearish on software.
Legacy software names like Salesforce, ServiceNow, Intuit, LegalZoom and others tumbled on Wednesday, fueled both by fears of AI disruption and optimism on just how effective new AI tools have become.
Education software names like Duolingo and Chegg, too, have tanked.
AI leader Anthropic sparked the latest leg of the decline, this week releasing a new legal tool that could usurp traditional legal software and data services.
The broader technology trade has diverged sharply over the last several months.
While “picks and shovels” hardware providers and semiconductor stocks have continued to climb, the companies that sell the application layer have turned lower.
Investors, it seems, are indeed pricing in a “software-as-a-service apocalypse.”
The fear is that AI agents will move from being features within apps to becoming the apps themselves.
That dismantles software firms’ seat-based business models that ruled the last decade, where companies can charge subscription fees per human user at a company.
The fact a single, well-prompted AI agent can now do the job of five or ten “seats” does not bode well for the old framework.
For now, the market is saying that the software era is over and AI is eating everything that stands in its way.
Market snapshot
Elsewhere
📊 Google crushed earnings estimates. The stock ticked up after the results, with the company reported $113.83 billion in revenue, above expectations for $111.43 billion. The company expects capital expenditures this year to almost double that of 2025. (CNBC)
💉 Eli Lilly also blew past quarterly earnings estimates. It beat Wall Street expectations across the board, a stark contrast to Novo Nordisk, which warned Tuesday of a sales and profit decline in the year ahead. (CNBC)
📉 AMD had its worst day since 2017. CEO Lisa Su said the chipmaker has still seen rising demand and an uptick in its data center business, though the stock fell 17% anyway on the day before retracing some of its losses in overnight trading. (Yahoo Finance)
Interview
I sat down with New York Stock Exchange senior strategist Michael Reinking to discuss the metals rally, the small-cap resurgence, the biggest risks to asset prices, and how to position for 2026.
Tune in on YouTube, Spotify, or Apple Podcasts.
Rapid-fire
Private payrolls rose by 22,000 in January, less than half of what economists forecasted (CNBC)
Scott Bessent said Americans have lost trust in the Fed (Yahoo Finance)
Oil prices ticked higher after conflicting reports on US-Iran nuclear talks (Bloomberg)
Hedge funds made $24 billion shorting software stocks in 2026 so far (CNBC)
Qualcomm expects a global memory shortage to hit mobile phone sales (Reuters)
Amazon CEO Andy Jassy tapped exec Darmesh Mehta to be his new “shadow” advisor (CNBC)
Walmart added most of its $1 trillion market cap in the last 2 years (Opening Bell Daily)
Washington Post initiated widespread layoffs, affecting all departments (CNBC)
On this day
🗓️ February 5, 1971: Apollo 14 astronauts completed a successful moon landing and lunar surface mission, marking the third human landing on the moon.
Last thing
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