LSEG rallies after JPMorgan reiterates Buy and Goldman plays down AI risks

LSEG shares bounced back Thursday, rising 7.4%, after taking a brutal 19% fall over the two days before. The rebound came after two major banks, JPMorgan and Goldman Sachs, told clients that panic over artificial intelligence wiping out LSEG’s business was overdone.

Both banks said AI wasn’t going to destroy the company’s data business, and investors seemed to calm down, at least for now.

The selloff started earlier in the week after Anthropic launched a set of AI tools under its Claude Cowork product. Those tools were built to automate common workplace tasks, and traders freaked out. People dumped anything that looked like software or data

LSEG got caught in that mess even though it doesn’t sell software. It sells financial data. JPMorgan’s Enrico Bolzoni said the market had it all wrong. “There’s confusion,” he wrote, adding that AI companies are working with LSEG, not replacing it.

JPMorgan and Goldman explain why the panic is wrong

Enrico reminded investors about the October partnership between LSEG and Anthropic. That deal gave Claude access to LSEG’s data. The message from Enrico was clear. LSEG is not getting left behind. It’s helping power the AI boom.

The data business is huge for LSEG, bringing in more than 40% of revenue in its latest earnings report.

This isn’t a startup running on vibes. LSEG built its data empire after spending $27 billion to buy Refinitiv in 2021. That deal made LSEG one of the top providers of financial data in the world. But after the Claude Cowork launch, the company got lumped into the software crash like the rest of the sector.

Goldman Sachs analyst Oliver Carruthers also pushed back. He said AI will only affect a small slice of LSEG’s business. Specifically, just 6% of revenue tied to workflow products could be exposed. Oliver also set a price target of 14,550 pence, the highest among all analysts watching LSEG, and said there’s still room for 90% upside from current prices.

The panic wasn’t just about LSEG. The entire software and data sector took a hit. On Wednesday, the Nasdaq 100 logged its worst two-day drop since October, losing over $550 billion in value. Traders are calling it the SaaSpocalypse.

The fear is that AI will kill the SaaS business model. That model depends on users paying monthly or yearly fees to access apps in a browser. In 2023, that model drove over $400 billion in cloud spending.

But if AI can do the same tasks faster and cheaper, why pay? That’s the question eating up these companies. Anthropic’s Claude Cowork tools promise to automate things people used to do with regular apps. That’s what sent shares of Microsoft, Salesforce, Oracle, Intuit, and AppLovin tumbling.

Goldman’s software stock basket dropped 15% in seven days, falling to its lowest point since April. It’s now 25% below where it was in September.