US software stocks fall as Anthropic's new AI model revives disruption fears

April 9 (Reuters) - U.S. software ⁠shares tumbled on Thursday after Anthropic held back the wide release ⁠of a powerful AI model over concerns it could expose hidden cybersecurity vulnerabilities, deepening investor fears about the threat to traditional software firms.

Anthropic said earlier this week it would only allow a group of around 40 companies, including Microsoft and Google, access to its "Claude Mythos" model ⁠because it has already found ⁠thousands of vulnerabilities, including some in every major operating system and web ⁠browser.

"If Mythos is that strong and that powerful and it's exposing these vulnerabilities that have been around for years, it just ⁠shows one, the weakness of the current software that's out there and two, that AI is still making incredible progress versus legacy software ⁠companies," said Michael O'Rourke, chief market strategist at JonesTrading.

The S&P 500 Software and Services Index is down nearly 26% this year, including Thursday's 3.1% drop, on worries ⁠that rapid progress in AI could hit SaaS (software-as-a-service) companies that sell subscription-based products to clients.

Cybersecurity firms Cloudflare, Okta, CrowdStrike and SentinelOne dropped between 4.7% and 7.7% in morning trade.

Zscaler was among the ⁠biggest decliners on the S&P 500, down 8.6%. Brokerage BTIG downgraded the stock to "neutral" from "buy", citing concerns over demand and potential competition.

"We're getting back to being concerned about the prior software-specific concerns stemming from AI and private credit that are coming back to the ⁠fore," said Steve Sosnick, chief market analyst at Interactive Brokers.

Enterprise software developer Atlassian, human resources software provider Workday, Photoshop software maker Adobe, enterprise cloud firm Salesforce and TurboTax-parent Intuit dropped between 3.7% and 6.8%.

(Reporting by Shashwat Chauhan in Bengaluru and Sinéad Carew; Editing by Sriraj Kalluvila)