Stocks fell sharply Tuesday as investors sold off software and data companies amid fears that new AI tools could disrupt their businesses.

The tech sector led losses, dragging the S&P 500 down 0.8% and the Nasdaq Composite down 1.4%, after Anthropic unveiled an AI agent capable of handling tasks across law, finance, and data analytics.

Major firms like Salesforce, Thomson Reuters, CoStar, and the London Stock Exchange Group plunged, reflecting growing concern that AI-native competitors could undercut established players.

The selloff was compounded by a more than 20% drop in PayPal shares following weak earnings and a CEO change, while bitcoin slid further as investors pulled back from riskier assets, NBC News has reported.

Offsetting some of the gloom, Palantir shares jumped on strong earnings, and energy and consumer staples stocks traded higher.