LIVE MARKETS-Tariffs may dim U.S. software industry's AI boost

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TARIFFS MAY DIM U.S. SOFTWARE INDUSTRY'S AI BOOST

The U.S. software sector, which has rallied on the back of the AI boom, could be a big loser due to the U.S. tariff storm.

President Donald Trump's sweeping new tariffs have rattled financial markets and now, analysts say, they're threatening to take a bite out of the software industry's AI-fueled momentum.

Jefferies is calling the current quarter a "peak period of uncertainty" for companies such as IBM IBM.N and Palantir Technologies PLTR.O as jittery customers delay big-ticket software deals. That means AI workloads, the big revenue driver for the last two years, could be the first to get shelved.

And the market is already pricing in the potential weakness.

IBM shares dropped as much as 4% on Monday, adding to last week's near 7% tumble following the tariff announcement. The stock had risen 34.4% last year on its growing AI consulting business.

Palantir, known for providing governments software that helps visualize army positions, slid nearly 10% before clawing back gains to trade up 0.7%, after a 14% drop last week. The stock had jumped more than 340% last year.

The two companies could be in for about 15% downside from current stock levels due to the tariffs, Jefferies said in its note on Sunday, as it slashed revenue or profit estimates for 29 software firms.

"Customers are going back to basics," Jefferies wrote. "AI workloads will likely take the back burner from here on out."

The comments add to the woes of software firms, which are already under pressure to show returns on their heavy bets in generative AI at a time when the economic picture is worsening.

Goldman Sachs has raised its U.S. recession odds to 45% from 35% in its second bump in a week. J.P. Morgan is even more bearish, pegging the risk of a U.S. and global recession at 60%.

(Arsheeya Bajwa)

FOR MONDAY'S EARLIER LIVE MARKETS POSTS:

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WATCH THOSE RETAIL FLOWS - CLICK HERE

SELL EVERYTHING! - CLICK HERE

EUROPE BEFORE THE BELL: FUTURES TANK AS TRUMP STICKS TO HIS GUNS - CLICK HERE

TARIFF MEDICINE'S CRIPPLING SIDE EFFECTS - CLICK HERE