PAUL MCBETH: Claude starts showing a little sass

Paul McBeth is the editor of The Bottom Line and Curious News, and previously worked at BusinessDesk for 15 years. He’s owned shares of Vista International Group since January 2024.

When the next new thing starts coming for office jobs, people start to notice.

Take the tech insurrection we saw on Wall Street through the middle of the past week.

All those data-rich firms and legal publishers didn’t like the prospect of Anthropic’s Claude Cowork encroaching into their territory by providing a bunch of artificial intelligence-powered shortcuts to ringing up your friendly neighbourhood lawyer by automate some elements of the legal profession such as contract review, compliance workflows and templated responses.

And so, the market sent stock prices tumbling as disruption of various software-as-a-service firms got investors second-guessing the permanence of what seemed like a solid operating model for the past couple of decades.

Investors weren’t too picky either, with the tech-heavy Nasdaq Composite getting a bit of an index-wide slapping for three trading sessions before clawing back some of those losses when the dust settled on Friday.

Markets, after all, don’t go in straight lines.

Dōmo arigatō

Much of the AI revolution so far has been centred on the robots coming for everyone’s jobs, stripping out those menial tasks that never seem to matter until things go wrong or cash becomes tight.

Of course, blue-collar workers have been dealing with the robot revolution for decades. Stick your head into a modern factory and you’ll see the immediate impact of automation on a workforce – when Statistics New Zealand started the quarterly employment survey at the beginning of 1989, manufacturing jobs accounted for 21% of all jobs. That’s down to 10% these days.

And that’s even with our unwanted reputation of skimping on maintaining equipment and buying new kit, with the nation’s productivity mantra apparently one of working harder, not smarter.

To be fair, the selloff seemed overdone.

When you ask yourself what changed in that simple press release from Anthropic that was enough to wipe $2.6 billion, or 16%, from the value of Xero in a single session, the day after the Kiwi-born accounting software firm had been extolling its own successes in getting its customers to at least dabble in its own AI tools, it’s hard to come up with a plausible answer.

In saying that, Xero has more than halved in value from a peak in June last year, not helped by the scepticism among institutional investors about its US$2.5 billion purchase of US business-to-business payments platform Melio.

I’ve got a secret

Because that souring on Saas has been bubbling under the surface for a while with the king of SaaS, Salesforce, down about 48% from its highs in December 2024.

In much the same way that we laud entrepreneurs for their overnight successes and gloss over the years of hard graft they’ve typically put in, the tide has been going in in SaaS investment flows for longer than the latest kerfuffle might have you believe.

If we bring that back to New Zealand, utilities software firm Gentrack is down 52% from its November 2024 peak, travel software firm Serko has shed 47% from its high in November 2023, Vista Group International has slumped 55% from its March height, and Eroad has sunk 65% from its high point in September.

Sure, most of them have also had their specific issues confronting them, such as the emergence of a threatening competitor in the shape of a Kraken for Gentrack, Eroad’s retreat from the US, and Netflix’s dalliance with Warner Bros Discovery posing questions for the future of the global box offices Vista benefits from.

But even New Zealand’s thousand-mile moat wasn’t wide enough to insulate them from chill winds coming from Wall Street’s foul mood.  

Serko’s decline stands out in that it delivered a strong first half in November and – putting aside the soft US tourism sector – American carriers are expected to bounce back from a volatile 2025, boding well for the New Zealand firm’s growing North American footprint.

The problem’s plain to see

Which as Oliver Mander pointed out in the latest The Long and the Short of It podcast, while New Zealand’s defensive stock market tends to mean our local tech cohort doesn’t enjoy the same froth you might see on Wall Street, they feel the same pain when the tide turns on the broader sector.

That might seem a little unfair, but we were late adopters to the software craze that swept the world.

If you cast your mind back to the late 2000s when Xero first listed, it was anything but a market darling, with analysts and brokers still struggling to come to grips with the SaaS model that can run to years of running red ink at the bottom of the income statement before exponential growth happens in another one of those overnight sensations.

And even our current crop of tech companies are relative newbies when it comes to listed life, having joined the local bourse during the last frothy period of the early the 2010s.

All of which is a timely reminder that the animal spirits driving investor sentiment outside of a company’s fundamental business is and always will be a fickle thing.

Because while the tide’s out on the tech bros for the moment, when the AI monsters start lining up to go public, even Blind Freddie will be able to see those investment houses salivating.

Image from Andy Kelly on Unsplash.