The technology market is being shaken by a massive sell-off, as investors grow increasingly concerned that artificial intelligence is beginning to directly threaten traditional business models, reshaping the balance of power across industries.

Wall Street has experienced several AI-related sell-offs since ChatGPT entered widespread use. Nothing, however, compares to this week’s shock. In just two days, hundreds of billions of dollars were wiped off the value of stocks, bonds, and corporate loans across Silicon Valley companies of all sizes.

Software stocks were at the center of the turmoil, with losses so severe that the total value of shares tracked by a related iShares ETF fell by nearly $1 trillion within seven days.

Unlike previous episodes, the trigger was not fear of a speculative “bubble,” but anxiety that AI is on the verge of replacing the core business models of a large number of companies—exactly as pessimists have warned for years.

“I don’t see this as an overreaction,” says Michael O’Rourke of JonesTrading. “For two years we’ve been talking about AI as a multi-generation technology. In recent weeks, we’ve started to see what that actually means in practice.”

The spark appeared, at first glance, almost harmless: Anthropic PBC unveiled a new AI tool designed for legal work, such as contract review. The product itself is not yet considered revolutionary.

However, after a year in which the company’s coding tools had already transformed how software is developed, the brief announcement was taken extremely seriously by the market, reinforcing fears that AI’s real economic impact is now accelerating.