<div id="readability-page-1">Fears that increasingly capable AI agents pose existential threats to the traditional software business have rippled through global equity markets, triggering a sharp sell-off in US software stocks this week and spilling over to China’s software-as-a-service (SaaS) sector. Analysts say the impact on China could be just as profound, but shaped by different structural dynamics. “SaaS growth in China in the next few years will be driven by several leading companies in cloud services and AI – Alibaba [Group Holding], Tencent [Holdings] and ByteDance,” said Aras Poon, an analyst at S&amp;P Global Ratings. Alibaba owns the South China Morning Post. Unlike the US, which is home to a broad base of specialised software companies, China’s software sector has long lagged behind in scale and maturity, constrained by slower cloud adoption and a weaker appetite for recurring subscription fees. Overall information technology (IT) spending accounts for about 3 per cent of China’s GDP, compared with roughly 9 per cent in the US, according to S&amp;P Global Ratings’ estimate. The landscape is increasingly shaped by platform giants that control cloud infrastructure, large language models (LLMs) and established software development capabilities, and smaller companies will be more dependent on dominant players, according to Poon.  Concerns over artificial intelligence-driven disruption have been growing as the world’s leading model developers push deeper into AI agents – systems designed to complete tasks autonomously rather than simply respond to user requests. On February 5, US AI giants Anthropic and OpenAI released Claude Opus 4.6 and GPT-5.3 Codex, respectively, which both emphasised agentic capabilities. “Obsessions over linear benchmarks as to what model is ‘best’ will look quaint,” industry research firm Semianalysis wrote in a note on Friday. “Every incremental model this year is going to heavily focus more on agent orchestration as well as performance, akin to [what] reasoning did last year.” Semianalysis points out that the massive deflationary cost of intelligence will reprice every IT company’s margins for repeat business, and enterprise software has been the “first casualty”. The equity market sell-off accelerated after a string of high-profile AI product launches. Anthropic’s roll-out last Friday of several Claude plug-ins, including one for legal work, triggered the latest sell-off. Last week, Google unveiled its Genie 3, which allows users to simulate an interactive real-world environment through simple prompts. The announcement weighed on video game stocks given Genie 3’s potential to reshape how games are developed.  The S&amp;P 500 software and services index fell 7.8 per cent this past week and is now more than a quarter below its October peak. Goldman Sachs’ internal “broad software basket”, which tracks companies in the sector, has shed roughly US$2 trillion in market value from its highs, a decline of about 30 per cent. Goldman said there was little evidence of stability returning to the market as investors remain concerned. The negative investor sentiment carried over to Chinese software stocks, which saw drops of between 3 per cent and 12 per cent on February 4, compared with a 0.2 per cent decline in the MSCI China Index, according to Morgan Stanley. In a note dated February 4, the US investment bank said investors were beginning to price in AI disruption risks for Chinese software companies, marking “the start of a long-term narrative turnaround” after what it described as an “unjustified” rally in January. Not all analysts see the sell off as a sign of deeper trouble. Lorraine Tan, director of Asia equity research at Morningstar, said the decline in mainland China and Hong Kong tech stocks looked like a “healthy pullback”, largely concentrated in sectors that had overshot their fair value. Sentiment has been weighed down by a barrage of global and domestic concerns in the past week, said Phelix Lee, a senior equity analyst at Morningstar. In addition to the “AI disruption” fears triggered by Anthropic’s tools, there were rumours of a value-added tax hike for Chinese internet companies – later denied by authorities – and a broader risk reduction shift in the AI hardware trade. Additional reporting by Coco Feng</div>

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<p>Fears of AI disruption have led to a sell-off in US software stocks, impacting China's SaaS sector. Analysts predict that growth in China's SaaS will be driven by major players like Alibaba, Tencent, and ByteDance, despite the sector lagging behind the US in scale and maturity. The S&P 500 software index fell 7.8% last week, with Goldman Sachs reporting a $2 trillion decline in market value. Chinese software stocks also dropped 3-12%. Some analysts view the decline as a healthy correction, while concerns over AI and tax rumors weigh on sentiment.</p>

- The recent sell-off in US software stocks, driven by fears of existential threats from advanced AI, has also affected China's SaaS sector, with analysts noting different structural dynamics at play.  
- Major Chinese tech firms like Alibaba, Tencent, and ByteDance are expected to propel SaaS growth in contrast to the more mature US software landscape.  
- Concerns over AI-driven disruptions have intensified, leading to significant declines in equity markets, highlighted by a 7.8 percent drop in the S&P 500 software and services index and up to a 12 percent decrease in Chinese software stocks.

US software rout spills over to China’s SaaS sector