BREAKINGVIEWS-The Week in Breakingviews: Agents of destruction

By Peter Thal Larsen

LONDON, Feb 15 (Reuters Breakingviews) - Welcome back! And a special thank you to all the new subscribers who have signed up in the past few weeks. Please let us know how we’re doing and what else you would like to see. If this newsletter was forwarded to you, sign up here to receive it in your inbox every weekend.

OPENING LINE

“The iPhone put the internet in our pockets. Now, Big Tech is on the hunt for a device that can weave artificial intelligence into the fabric of daily life.”

Read more: Essilor upside is visible with rose-tinted glasses.

FIVE THINGS I LEARNED FROM BREAKINGVIEWS THIS WEEK

1. Japanese real wages fell every month in 2025.

2. Gucci owner Kering’s operating margin last year was 11%, down from nearly 30% in 2022.

3. Indian fund manager SBI is paying fees of just 0.01% on the proceeds of its stock market listing.

4. China’s trade deficit in “low-complexity goods” like animals, food and precious metals reached 2.2% of GDP in 2024.

5. Only 18% of European online shoppers use lockers for deliveries.

FROM BUBBLE TO TROUBLE

As Big Tech giants throw ever-larger amounts of cash at artificial intelligence, investors have been mostly preoccupied with one big question: what if it doesn’t work? In the last few weeks, however, their focus has shifted to industries vulnerable to disruption by AI chatbots. Now the most pressing question appears to be: what if it does work?

This preoccupation has triggered an extraordinary rolling selloff which has hit the shares of software companies, data providers, professional services firms, wealth managers and even logistics operators. The availability of an AI tool which promises to automate parts of a company’s business has been sufficient to alter the growth expectations for entire industries. As Liam Proud calculates, the share prices of large companies such as ServiceNow NOW.N and Salesforce CRM.N now imply that growth in free cash flow will shudder to a halt, and in some cases shrink, after 2030.

So far, there’s little hard financial evidence to support the shift. Anthropic, the startup whose AI coding agent is the source of much of the angst, just raised $30 billion at a $380 billion valuation. Claude Code’s revenue is running at an annual rate of $2.5 billion – impressive growth, but a tiny fraction of the expected future software sales that investors now think will be vaporised.

Quite how AI agents will handle data management, customer support, security, systems integration and other things software companies do remains something of a mystery. Indeed, Claude’s own creators appear to be puzzled by how the model works, as this charming-yet-alarming piece in the New Yorker makes clear. “It’s like we understand aviation at the level of the Wright brothers, but we went straight to building a 747 and making it part of normal life,” one employee tells the magazine.

Another unresolved question is how upending value chains will move money around. Big Tech investments in data centres and chips – set to reach almost $700 billion this year – are based on a bet that they will eventually bring in enough revenue to earn a return. Yet the recent selloff raises an intriguing possibility: what if the technology displaces incumbent businesses like software providers, but doesn’t provide enough revenue to pay for the AI companies’ outlays? The answer to the question “does it work” could end up being both “yes” and “no”.

CHART OF THE WEEK

British politicians are obsessed with bond markets. Ever since a sudden selloff helped eject Prime Minister Liz Truss from office in 2022, parliamentarians have fretted about how shifts in government policy will affect borrowing costs. Recent speculation about possible challenges to Keir Starmer’s premiership is no exception. Yet Westminster’s myopia ignores the many other factors that affect yields on UK government bonds. As Jon Sindreu shows, the much larger market for U.S. Treasury securities is the biggest influence. Meanwhile, risks specific to the United Kingdom have vanished from the bond market.

THE WEEK IN PODCASTS

For decades, economists mostly viewed globalisation and free trade as self-sustaining forces that left most people better off. Now that integration has turned to disintegration, can anything stop the tailspin? Not according to Eswar Prasad, author of “The Doom Loop: Why the World Economic Order is Spiraling into Disorder”. In this week’s episode of The Big View we talked about why economic cooperation went into reverse, and what might be done to salvage it.

Over on the Viewsroom, Aimee Donnellan and Jonathan Guilford were joined by Neil Unmack and Pranav Kiran to talk about artificial intelligence, the software selloff, and why providers of private capital are particularly exposed.

PARTING SHOT

There is one surprising haven from the cold winds of artificial intelligence: the market for office property. Prices of commercial buildings plummeted during the pandemic as companies sent staff home and investors fretted that desk workers might never return. Since then, though, demand has come surging back, Yawen Chen writes. Despite the threat of self-teaching computers displacing white-collar jobs, planning obstacles and rising construction costs mean big companies like BlackRock and HSBC are seeking to snap up space. Knight Frank even reckons vacancies in prime London offices could hit zero in 2028. Take that, chatbots.

Want to receive The Week in Breakingviews in your inbox every Saturday? Sign up for the newsletter here.

Follow Peter Thal Larsen on Bluesky and LinkedIn.