The AI Selloff Contagion: Why Every Sector Built on Predictable Human Work Is Getting Repriced

The pattern is becoming sickeningly predictable. Anthropic announces another funding round, this time at a £300 billion valuation, and within hours, entire sectors are bleeding red across trading screens. Software stocks crater. Indian IT outsourcers plummet. Private equity firms nosedive. Now even real estate companies are getting hammered.

This isn't a correction anymore. It's contagion. And it's spreading to every business model built on humans doing predictable work.

The numbers tell the story better than any pundit ever could. Public software companies have lost £1.6 trillion in market value over the past twelve months — a 40% wipeout that makes the dotcom crash look surgical. Xero just posted its worst single day since 2013. Workday's CEO resigned during the turmoil. Even Jensen Huang's attempts to calm markets by dismissing the idea of AI fully replacing enterprise software have fallen on deaf ears.

But here's what the market is missing: this selloff is mostly bollocks. Yes, AI will kill some businesses. Yes, the SaaS "gym membership" model is dying. But the wholesale panic spreading across sectors suggests investors have forgotten how technology actually displaces industries — and more importantly, how it creates new ones.

The SaaSpocalypse Goes Global

It started with what Pivot to AI aptly called the "SaaSpocalypse" — investors finally admitting they'd overspent badly on software companies and using AI as the convenient scapegoat. Fair enough. Half these SaaS darlings were charging enterprise prices for what amounted to glorified database CRUD operations.

But then the fear jumped borders. Indian IT giants got absolutely battered, with Infosys down 7% and TCS down 6% in a single session. The Indian Express ran headlines asking if this was "the end of the Indian IT era" — existential fears that would make you think Anthropic had just automated away every developer in Bangalore overnight.

Then it spread to private equity. Blue Owl Capital saw double-digit drops. Ares, Apollo, KKR, TPG, Blackstone — all fell in sympathy. Why? Because these firms are stuffed with software investments, and suddenly every portfolio company looked like it might be next on AI's hit list.

Now it's hitting real estate. Property management firms, real estate services companies, even REITs with heavy exposure to office space are getting hammered. The logic, if you can call it that, goes something like this: if AI kills software jobs, office demand collapses. If AI automates property management, those companies are toast. If AI handles transactions, estate agents are finished.

It's fear trading at its most primitive. See AI news, sell everything that employs humans. Rinse and repeat.

The Contagion Mechanics

The speed of this contagion isn't random — it's following the money trails that private equity created over the past decade. PE firms binged on software companies during the zero-rate bonanza, loading up on SaaS businesses with recurring revenue models that looked unshakeable. When AI started threatening those models, the selloff didn't stop at software. It followed the portfolio connections.

Take Blue Owl's portfolio. They're not just invested in software — they own pieces of financial services firms, real estate companies, business process outsourcers. When their software investments started looking dodgy, investors began questioning everything else. Why would you pay premium multiples for a mortgage processing company when AI might automate underwriting? Why hold real estate service firms when AI could handle property management?

This is textbook contagion: rational fear in one sector spreading irrationally to connected sectors. The problem is that private equity's tentacles reach everywhere now. There's barely a sector that doesn't have some PE connection, which means barely a sector that's immune from this AI panic.

Anthropic didn't help matters when they announced industry-specific plugins for finance, legal, consulting, and insurance. Suddenly it wasn't just software under threat — it was every knowledge worker in every professional services firm. The market looked at those announcements and saw pink slips stretching from Wall Street to Main Street.

What the Market Gets Wrong

Here's where the panic gets stupid. The market is treating AI like a binary switch: either humans do the job or AI does. Either software companies win or they die. Either IT services are necessary or they're not.

Reality is messier. Take IT services, where the doom-mongering has been loudest. JP Morgan's analysts argue AI won't kill IT services — it'll create more work. Legacy system modernisation, AI integration projects, trust and reliability frameworks for AI systems, agent operations management — all net new categories of work that didn't exist five years ago.

Aaron Sneed, a Florida entrepreneur running a defence-tech company, told me he's operating with 15 AI agents handling everything from customer support to financial modelling. But he's not employing fewer humans — he's employing different humans. Instead of junior analysts grinding through spreadsheets, he's hiring specialists who can design, train, and manage AI systems.

The pattern repeats across sectors. Yes, AI will automate parts of property management — routine maintenance scheduling, lease renewals, tenant communications. But it's also creating new opportunities in AI system integration, data analytics, predictive maintenance. The humans aren't disappearing; they're moving up the value chain.

Even in software, the story is more nuanced. Jensen Huang dismissed the idea of AI fully replacing enterprise software, and he's right. Enterprise software isn't just about the functionality — it's about compliance, security, integration, customisation. AI might handle the basic workflows, but someone still needs to make it play nice with existing systems.

The Pricing Model Revolution

What is dying is the SaaS "gym membership" model — fixed monthly fees regardless of actual usage or outcome. That model only worked when software was genuinely scarce and difficult to build. When AI can spin up functional applications in hours, charging £50 per user per month for basic CRM functionality becomes untenable.

The future is consumption-based and outcome-based pricing. Pay for what you use. Pay for results delivered. Pay for problems solved. This shift terrifies existing SaaS companies because their margins will compress dramatically. But it doesn't mean software businesses disappear — it means they have to actually deliver value proportionate to their pricing.

Workday's CEO resignation during this turmoil isn't coincidental. HR software companies built their entire business on the premise that managing human resources was inherently complex and required sophisticated, expensive tools. When AI can handle most HR workflows natively, that premise crumbles. The companies that survive will be those that can rebuild their value proposition around outcomes rather than feature lists.

Real estate is facing a similar reckoning. Estate agents charging 2-3% commission for what amounts to form-filling and diary coordination were already living on borrowed time. AI just moved up the timeline. But property investment, development, and management — the parts that require local knowledge, relationship management, and strategic thinking — those aren't going anywhere.

The Great Separation

Fortune's analysts have it right: we're approaching a separation where winners and losers will diverge dramatically. The market's current approach — selling everything indiscriminately — is creating massive opportunities for investors willing to think beyond the headlines.

The winners will be companies that embrace AI as a tool to deliver better outcomes at lower costs, not companies trying to build moats around routine human tasks. In IT services, that means firms specialising in AI integration rather than basic coding. In real estate, it means companies using AI to provide better market insights and property management, not those pretending technology doesn't exist.

The pattern is consistent: every time AI steps closer to owning entire workflows rather than just assisting with them, valuations break. But breaking valuations doesn't mean broken businesses. It means businesses being repriced to reflect their actual value creation rather than their artificial scarcity.

Take TCS and Infosys. Yes, their basic coding and support services are under threat. But these are massive companies with deep client relationships, system integration expertise, and global delivery capabilities. AI might reduce their headcount, but it's also creating new service categories around AI implementation, data strategy, and automated system management.

The market is pricing them like they're going to disappear entirely. That's madness. They're going to transform, compress margins, and find new revenue streams. Some will do it better than others, but the wholesale write-off assumes these companies learned nothing from previous technology waves.

What Comes Next

This contagion will continue spreading until it hits sectors that genuinely can't be automated away. Manufacturing companies with physical assets. Healthcare providers with regulatory requirements. Infrastructure firms with government contracts. Energy companies with geological constraints.

But before it gets there, we're going to see some spectacular overshoots. Real estate companies trading at fire-sale prices despite owning irreplaceable physical assets. Financial services firms discounted beyond reason despite having regulatory moats AI can't breach. IT services giants valued like they're going out of business despite sitting on decades of client relationships and system knowledge.

The smart money will be buying these overshoots, not selling into them. Because while AI will certainly reshape these industries, it won't eliminate them. And companies trading at distressed multiples due to AI panic often represent the best risk-adjusted returns available.

The SaaSpocalypse has gone global, but it's revealed more about market psychology than about AI's actual capabilities. Fear is contagious. Rationality, unfortunately, isn't. But for investors willing to separate signal from noise, this panic is creating opportunities that won't last long.

Because the market might be repricing everything, but it's getting most of the pricing wrong.