London-listed software stocks rose on Monday after calls from major AI companies to slow development offered relief to businesses that investors had viewed as vulnerable to the technology.
Sage climbed more than 5 per cent, making it the fastest riser among FTSE 100 firms, while RELX also gained. The moves followed backing from Anthropic, OpenAI and Elon Musk for slowing the development of the most advanced AI models.
The gains helped London buck a wider technology sell-off. The FTSE 100 was around 0.6 per cent higher at 10,717 in early afternoon trading, despite sharp falls in AI-linked stocks in Asia and lower US technology futures.
Software shares benefit from AI concerns
Russ Mould, investment director at AJ Bell, told City AM: “The contrast could not be more stark,” pointing to Sage’s rise to the top of the blue-chip index while Polar Capital Technology Trust, a major backer of AI stocks, fell towards the bottom.
Software and IT services stocks have been under pressure since the AI spending boom accelerated last year. Investors had questioned whether rapidly developing models could take business away from established companies.
Mould said any indication that AI may not deliver what many believe it can, either on time or at all, or that regulators may act to manage its scope, could bring some relief to depressed share prices.
Chris Beauchamp, chief market analyst at IG, described the prospect of an AI slowdown as a “boon” for FTSE software stocks. He told City AM that Sage and RELX had been “victims of the ‘SaaSpocalypse’” because of fears that AI would wipe out their businesses.
“If the AI giants do put their foot on the brake then the outlook for revenues for Sage, RELX and their SaaS brethren globally becomes much brighter,” Beauchamp told City AM.
UK market relatively sheltered from AI sell-off
The contrast was sharper in Asia, where OpenAI investor SoftBank plunged as much as 13 per cent. Chipmakers SK Hynix, Samsung Electronics and Kioxia also fell, while Nasdaq 100 futures were around 1.3 per cent lower ahead of the US open.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, told City AM that the UK had been “relatively sheltered” because it has little direct exposure to the chips and data-centre infrastructure behind the AI spending boom.
However, Britzman cautioned against assuming that calls for safer AI would lead to a sharp drop in investment. “Slowing a model release for additional testing is very different from slowing the investment needed to build and run AI systems,” he told City AM.
Mandeep Singh, senior technology analyst at Bloomberg Intelligence, estimated that the huge initial training runs AI developers could decelerate account for only around 10 to 15 per cent of overall training spending. More money could instead move towards improving existing models, including safety testing and the computing power needed when they answer complex questions.
UK could benefit if AI race slows
The so-called Magnificent Seven account for more than a third of US stock market value and around a fifth of global market capitalisation. By contrast, Britain’s relatively small technology sector has left it largely outside the AI investment boom.
Mould said that, if there is a slowdown in the AI race, the UK market could benefit “at least on a relative basis” as investors reassess the earnings growth and valuations attached to US technology giants. Analysts stressed that this remains a big “if”.
Source: City AM
