On the eve of invading Ukraine in 2022, Russia enjoyed a decent global position. It had a strong partnership with China; extensive economic ties with Europe; a working relationship, however fraught, with the United States; and an informal network of partners with which to do business. Russia dominated few countries (other than Belarus) but also had few real enemies and could exercise influence beyond its neighborhood. More than a rising or declining power, Russia was a protean power.

Then Russia invaded Ukraine. In response, Europe and the United States immediately became Moscow’s adversaries. The Kremlin, having lost much of its diplomatic influence in Europe, became much more reliant on China. The war, meanwhile, has absorbed Russia’s attention and virtually all of its military capacity, making it hard for Moscow to steer events farther afield. As a result, the Kremlin could do little as some of its allies, including Bashar al-Assad in Syria and Nicolás Maduro in Venezuela, fell. The war itself has not gone particularly well, either. After four years of fighting, Ukraine remains in control of roughly 80 percent of its territory.

But Moscow is hardly prepared to cut its losses. Unless U.S. President Donald Trump can persuade Russian President Vladimir Putin to end the fighting—an unlikely scenario—Russia will probably try harder to subjugate Ukraine, not because the battlefield decisively favors Moscow but because Putin needs to hold the line somewhere. He is poised to respond to Russia’s geopolitical limits by recommitting to its war. The humanitarian catastrophe he has already inflicted on Ukraine, depriving it of heating and electricity amid freezing conditions, may soon get even worse.

Putin has long overestimated what Russian hard power alone can achieve. This problem first manifested itself in Ukraine in 2014. Having incited a revolution, Viktor Yanukovych—Ukraine’s president from 2010 to 2013 and a Kremlin ally—fled the country. Putin could have responded to Yanukovych’s ouster by cooperating with Yanukovych’s successors. Instead, he opted for military force, invading Crimea in Ukraine’s south and the Donbas in its east. Russia seized the former and established two breakaway regions in the latter, but in the process it inadvertently undermined organic pro-Russian sentiment in Ukraine. After 2014, Kyiv strengthened ties with Washington and Europe, which is exactly what Putin was hoping to prevent. In 2022, the limits of Russian hard power became even more evident. Although large military forces invaded Ukraine from several directions, they could not take its three largest cities, including the capital, and were soon pushed back along multiple axes. The Kremlin, which had banked on a quick and total victory, was stuck in a long slog.

Ukraine’s successful resistance forced Russia to adapt its foreign policy. To evade export controls, Moscow procured restricted goods through intermediaries in Central Asia and the South Caucasus. It started selling much more oil to India, often at steep discounts. To sidestep U.S. and European energy sanctions, Russia cobbled together a “shadow fleet”—a mass of aging tankers that typically carry bogus insurance and use opaque business structures to hide their true owners. China became Russia’s primary source of industrial goods and the biggest buyer of its fossil fuels. For Moscow, the decision to forge deeper relations with China was practical as well as strategic. The Kremlin hoped to lead the so-called global South with Beijing and to accelerate the decline of the West. Whereas China can use its massive economic clout to win favor in Africa, Asia, and Latin America, Russia can capitalize on its skills in subversion and on the former Soviet Union’s positive reputation in parts of the postcolonial world.

After years of hedging in the Middle East between Iran and Israel, Russia began favoring Iran and its anti-Western partners in 2022. It tightened defense cooperation with the Islamic Republic over Israel’s protestations. On several occasions in 2024, Putin rolled out the red carpet in Moscow for representatives of Hamas and the Houthis. Russia’s relationship with Israel did not fully unravel—the two sides continued to coordinate their military activities to avoid clashes in Syria, for instance—but it frayed considerably.

These shifts masked a more negative and enduring reality for the Kremlin. Russia had lost much of its capacity to protect its partners and its interests beyond Ukraine. In 2023, Russian peacekeepers stood by as Azerbaijan seized the disputed enclave of Nagorno-Karabakh from Armenia, Russia’s traditional ally. As Israel fought and weakened the Iranian-backed Hezbollah militia in Lebanon, the Houthis in Yemen, and even Iran itself, Russia watched from the sidelines. Russia was once again a bystander when, in December 2024, local rebels swept away the Assad regime in Syria, a dynasty Moscow had been fighting for years to preserve.

In 2024, the Kremlin celebrated Trump’s reelection. At the start of Trump’s second term, many observers predicted that his disdain for international law, apparent embrace of spheres of influence, and affinity for what Russia calls traditional values (such as an aversion to LGBT rights) would advantage Moscow. That has not been the case. Now that the United States has embraced revisionism, Russia’s inability to project power beyond Ukraine has become more obvious. In the summer of 2025, the United States joined Israel in the air campaign that damaged Iran’s military and nuclear infrastructure. In January, Trump extracted Maduro in a sleek, overnight military operation that Putin could only dream of. For all his complaints about Kyiv, the U.S. president has yet to abandon Ukraine, although he has been less generous with assistance than was President Joe Biden.

Trump has also repeatedly taken the initiative in Russia’s backyard. He has showered Central Asian leaders with attention and deemed himself the mediator in chief between Armenia and Azerbaijan. In January, the United States and Armenia announced an implementation framework for the Trump Route for International Peace and Prosperity, a trade corridor in the South Caucasus. Trump has also invited Russia to join his Board of Peace, a new conflict-settlement body, without granting Russia special status. Trump expects Putin to defer to his leadership role.

Russia is hardly out the picture regionally or globally. Moscow retains influence in the Middle East and has increased its clout in western Africa by deploying its Africa Corps, a paramilitary group, on behalf of Sahelian juntas. Russia does not rely on Iranian or Venezuelan support to prosecute its war against Ukraine. China and North Korea remain committed partners, and Russian state media has been celebrating Trump’s degradation of the transatlantic alliance, most recently with his threats to take Greenland.

But Moscow has yet to gain any advantages from the tensions between Washington and European capitals. Europe is increasing its own support for Ukraine, and NATO remains a functioning institution with which Russia must reckon. Putin cannot assume that Trump’s foreign-policy adventurism will be confined to the Western Hemisphere and the Middle East. It could easily and suddenly make itself felt on Russia’s doorstep. 2025 was a bad year for Russia, and 2026 may be even worse. Moscow’s global position is ebbing because of Trump.

As Russia struggles to assert itself globally, Putin has become even more obsessed with Ukraine. The situation on the battlefield is sustainable for Moscow. Russia’s frontlines are holding, and its forces are making gradual territorial progress, but Moscow is far from winning. Despite the flurry of Ukraine-related diplomacy, peace talks have gone nowhere. Trump’s position on the war continues to oscillate. Meanwhile, Europe is discovering its agency and will not tolerate a peace plan tantamount to a Ukrainian surrender. Assisted by Europe, Kyiv will refuse to yield preemptively to Russia.

However miserable the conflict is for Russia, Putin is not in the mood to make concessions. He has reoriented the economy and structured global relationships to fight this war, which has already lasted longer than the Soviet campaign against Nazi Germany. Aware that the war’s outcome will be the ultimate referendum on his presidency, he may even consider escalating, including beyond Ukraine’s borders. In January, following claims that European countries had made progress on agreeing to security guarantees for Kyiv, Russia fired a type of ballistic missile at Ukraine that is nuclear-capable and has a range that violates the Intermediate-Range Nuclear Forces Treaty, which the United States quit in 2019. The missile landed 40 miles away from the Polish border.

The war may well be entering a more dangerous phase. Inspired, perhaps, by Trump’s seizure of tankers linked to Russia in the Caribbean and North Atlantic, European countries are doing more to harass Russia’s shadow fleet, which is already under attack from Ukrainian drones. Russia might escalate by striking Ukraine’s supply routes in eastern Europe or by attacking the U.S.-owned satellites that provide targeting information to Kyiv. Putin may push harder to make Ukraine uninhabitable—to impose financial burdens on its supporters and to threaten further refugee flows into Europe—even if he can’t win.

Though Europe and the United States would be wise to re-establish a coordinated process for handling the war, transatlantic friction will likely hinder such efforts. Europe should therefore step up its support for Kyiv, while readying itself for Russian escalation in and around Ukraine. Most important, U.S. and European leaders should not rush any talks to end the conflict. They must keep in mind the power their countries hold. Russia is neither invincible nor surging ahead. It is merely one of many countries disadvantaged by the anarchic world order Trump has unleashed in his second term.

• DIPLOMATIC-FUTILITY: Iranian leadership attempts to avoid military confrontation through urgent diplomatic missions, mirroring historical patterns seen with Iraqi officials before past U.S. interventions.
• STRATEGIC-INERTIA: Regional dictatorships consistently fail to recognize the imminence of foreign military action until diplomatic and preventive windows have closed.
• REGIONAL-CONCERN: Sunni states express public fear regarding war escalation, while privately worrying that the removal of the Iranian regime will consolidate Israeli hegemony in the Middle East.
• MILITARY-DOMINANCE: Israel has established unprecedented intelligence and strike capabilities, systematically dismantling Iranian proxies and expanding its influence into the Red Sea and East Africa.
• ACCOUNTABILITY-REPORT: A 55-page document released by the Prime Minister details systemic failures leading to October 7, attributing blame to both political leadership and the entire security establishment.
• SECURITY-ASSUMPTIONS: Top intelligence and security officials operated under the collective "conceptzia" that Hamas was deterred, leading to a failure to anticipate the 2023 attacks.
• POLITICAL-DEFENSE: The Prime Minister's dossier highlights military intelligence errors while failing to provide evidence of high-level challenges to the underlying strategic assumptions regarding Gaza.
• DEVELOPMENT-SUSPENSION: The Jerusalem municipality halted a luxury hotel project linked to a billionaire accused of providing material support and infrastructure to Hamas militants.

[

](https://substackcdn.com/image/fetch/$s_!kgDy!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F055cdd7a-6109-4e31-b4ca-ed2efdd9e71b_1024x683.jpeg)

Ayatola Ali Khameni meeting with a veterans organisation for the Iraq-Iran war in December 2025 (leader.ir)

It’s Friday, February 6, and this has already become a prewritten script: every time the United States moves to strike a Middle Eastern dictatorship, it is preceded by a nerve-racking wait, followed by feverish diplomatic contacts—and above all, the local dictator refuses to grasp the severity of his situation until it is too late.

Abbas Araghchi will not be the first foreign minister to fly urgently to meet Americans in an attempt to prevent war. Before him came Iraqi foreign minister Tariq Aziz, in a futile meeting with his counterpart James Baker. Saddam Hussein promised both President George H. W. Bush and President George W. Bush that the United States would discover hell in Iraq, that its forces would die there in droves, and that his country would stand firm. Aziz ended his life in a Baghdad prison; Saddam went to the gallows.

The Iranians are no more flexible, no less fanatical, and burdened with the same problems as their hated Iraqi predecessors. Their almost last hope of preventing action lies with the Sunni states of the Middle East. Qatar, Turkey, Egypt, and Saudi Arabia publicly warn that an American strike could escalate into a regional war. In practice, a Middle East expert told me this week, what truly worries them is the almost inevitable outcome of eliminating the ayatollahs’ regime: Israeli hegemony in the Middle East.

One does not need to believe Turkish President Recep Erdoğan’s fantasies about Israeli attempts to conquer Mount Ararat, nor buy into antisemitic conspiracy theories about a secret Netanyahu government plan to restore the days of the Kingdom of David, to understand the pressure. Nadim Koteich, a leading journalist in the Arab world and a harsh critic of Iran, wrote last week: “Regardless of your political views, the following fact cannot be denied: Israel is emerging from the post–October 7 era with unprecedented military and intelligence dominance. Its operations systematically dismantled the Iranian proxies, reshaped the security architecture of Lebanon and Syria, and demonstrated strike capabilities unmatched by any other actor in the region. Its recognition of Somaliland and expansion into the Red Sea signal ambitions broader than the traditional ones. For Saudi Arabia, which cannot normalize relations with Israel without some Israeli-Palestinian agreement, this creates an uncomfortable reality: the strongest military power in the region is not subject to any influence from Riyadh.”

For years, the Iranian threat troubled the Middle East but also bound Israel and most of its resources to the struggle against Tehran and its proxies. Now, the Iranian carcass lies in the middle of the room. For most of the Middle East, it is convenient for it to remain there—without a death certificate and without a new, far more Israeli Middle East.

This is an excerpt from my weekly column in Israel Hayom.

To read on my website click here

[

](https://substackcdn.com/image/fetch/$s_!QdLR!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fdc3f8086-e82d-4a95-a0fd-f4c5882b8c57_590x394.jpeg)

Prime Minister Benjamin Netanyahu convening the Security Cabinet in December 2025. (PMO)

While Americans are still combing through millions of pages from the Epstein files, Benjamin Netanyahu has released a far slimmer dossier on a different, more consequential controversy. The 55-page document released last night details the failures that preceded October 7.

So you don’t have to read it yourself, I’ll give you the summary: Netanyahu is guilty—and so is everyone else.

The document is a copy Netanyahu’s response to questions posed by the now-halted investigation of the state comptroller into the disaster. The High Court froze the comptroller’s probe in December , ruling that only a state commission of inquiry—appointed and directed by the court itself—could properly investigate the events leading to October 7. But it seems Netanyahu found a use for the testimony.

So what do the documents actually reveal?

Aside from some shocking quotes in hindsight—not much.

They confirm what was already assumed: no single person is to blame. Everyone is.

Quotes like the head of military intelligence claiming that Hamas is “most deterred” of Israel’s enemies, and the Shin Bet chief estimating the chances of an attack were “low” and that Israel should not “risk miscalculation” by mounting a broad response an hour before the October 7 attack, are difficult to read knowing what we know now—but they don’t change the fundamental truth:

The conceptzia—the widespread assumption within Israel’s security establishment that Hamas was deterred and content to govern its terrorist fiefdom in Gaza—was a group project.

In Israel, as in the rest of the world, success has many fathers while failure is an orphan. No one wants to be connected to the conceptzia’s heritage. But the quotes from the heads of the army, intelligence services, and security agencies show they all had a hand in it.

Of course, this series of quotes is compiled from Netanyahu’s perspective—selected selectively to evade responsibility. Conspicuously missing from the documents are his own statements reinforcing the conceptzia, which we know existed. Unfortunately, his defense collapses under its own weight: while the document shows his support for targeted strikes, nowhere is there evidence that he fundamentally challenged the prevailing assumption.

That raises the question: if he had been woken up on the morning of October 7, what would he have done? If he had acted, would the danger have disappeared—or merely waited for the next opportunity?

In short: the documents make one thing clear. In the last 10 years, no one—Netanyahu included—proposed conquering Gaza and eliminating Hamas. That makes him neither better nor worse than all the others.

[

](https://substackcdn.com/image/fetch/$s_!bArd!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fc9291f01-d515-4d3f-8595-fa6b6d4a7bf7_1137x716.png)

Palestinian Billionare Bashar al-Masri showing off his development Rawabi City in Gaza in 2014 (Facebook)

The Jerusalem municipality has halted a hotel development due to ties to an alleged Hamas supporter. The decision came after a plea lodged on Wednesday by bereaved families was accepted by the municipality.

Who is this alleged Hamas supporter?

None other than Palestinian American billionaire Bashar al-Masri—secret advisor to the Trump administration’s former hostage envoy, Adam Boehler.

Al-Masri is currently being sued in the U.S. by 200 families of October 7 victims who allege that he provided funding to Hamas and allowed the group to use his facilities in Gaza—including a beachfront hotel and an industrial area near the Israeli border.

The evidence doesn’t look great. His properties were found to contain Hamas tunnels, a Hamas naval commando base, and, according to the hotel plea, “other strategic assets that Hamas used to slaughter our children and kill our soldiers.”

The luxury hotel was planned for East Jerusalem, across from the Old City. The project has been paused pending the completion of a “thorough review.”

I have to agree with the parents: until his innocence is proven, I’d rather not provide Hamas’s Al-Aqsa Brigades with luxury accommodations across from the Temple Mount.

If you enjoy the newsletter, you can show your support by becoming a paid subscriber—it really helps keep this going. I’m also offering a special monthly briefing for a small group of premium members. I’d love to have you join us—just click below to find out more.

[

](https://t.me/amitseg)

[

](https://x.com/amitsegal)

Thanks for reading It's Noon In Israel! Subscribe for free to receive new posts and support my work.

• Historic merger: SpaceX and xAI formalized a 1.25 trillion dollar combination on January 31, marking the largest corporate tie-up by value in the United States.
• Strategic valuation: The merger was executed based on board-determined valuations of 1 trillion dollars for SpaceX and 250 billion dollars for xAI.
• Orbital infrastructure: The unified entity aims to deploy artificial intelligence data centers into Earth's orbit to achieve major cost efficiencies in computing.
• Capital empowerment: Bringing xAI under the SpaceX umbrella provides the startup with the financial resources necessary to rival established AI entities like OpenAI.
• Initial Public Offering: SpaceX representatives have confirmed internal plans to take the newly combined company public during the summer of 2026.
• Operational synergy: SpaceX has already integrated Spok, a customized version of the Grok chatbot, into its internal operations to leverage proprietary aerospace data.
• Market dominance: The deal follows a series of aggressive maneuvers, including Tesla's investment in xAI, to consolidate various high-growth technology sectors.
• Investor windfall: Supporters of the individual companies now hold stakes in a diversified aerospace and intelligence heavyweight positioned for extreme-scale technology deployment.

By

Alexander Saeedy

,

Corrie Driebusch

,

Becky Peterson

and

Micah Maidenberg

Feb. 5, 2026 10:35 pm ET

18

BPC > Only use to renew if text is incomplete or updated: | archive.ph

BPC > Full article text fetched from (no need to report issue for external site): | archive.today | archive.li

A SpaceX Falcon 9 rocket. Jennifer Briggs/Zuma Press

• SpaceX and xAI agreed to merge on Jan. 31, creating a $1.25 trillion company, the largest U.S. corporate tie-up by value.

• SpaceX was valued at $1 trillion and xAI at $250 billion by their respective boards for the merger.

• The merger will help fund xAI’s growth and realize Elon Musk’s vision of orbiting data centers for artificial intelligence.

An artificial-intelligence tool created this summary, which was based on the text of the article and checked by an editor. Read more about how we use artificial intelligence in our journalism.

• SpaceX and xAI agreed to merge on Jan. 31, creating a $1.25 trillion company, the largest U.S. corporate tie-up by value.

  View more

Elon Musk took a gulp of water on stage at the World Economic Forum in Switzerland last month and started talking up one of his latest passions: data centers orbiting Earth.

“The lowest-cost place to put AI will be space,” Musk said. “That will be true within two years, maybe three.”

Behind the scenes, the groundwork was already under way for a megamerger of SpaceX and xAI—his artificial-intelligence startup—intended to make the sci-fi vision a reality.

Within days, bankers from Morgan Stanley provided an estimated valuation of both companies that could be used to structure a merger, according to people familiar with the matter and investor disclosures viewed by The Wall Street Journal. SpaceX’s board decided as of Jan. 30 the company was worth $1 trillion, and xAI’s board decided it was worth $250 billion, the documents show.

SpaceX and xAI signed a merger agreement creating a $1.25 trillion company on Jan. 31. The deal closed two days later, making it the biggest corporate tie-up by value in American history.

The merger follows a busy year in dealmaking for Musk, from the combination of his social-media company X and xAI to Tesla’s $2 billion investment in the AI firm. It also promises a windfall for investors in xAI.

Newsletter Sign-up

Technology

A weekly digest of tech columns, big stories and personal tech advice, plus a news ticker and a touch of dark humor.

Subscribe

The billionaire entrepreneur has envisioned making xAI’s Grok the most popular artificial intelligence in the world, and building out its capabilities requires a lot of money. And for the startup, being hitched to SpaceX ahead of an initial public offering of stock gives it more financial muscle to compete with the likes of OpenAI and Anthropic. 

However, longtime investors in the satellite builder and rocket operator have had to make room for Musk’s AI shareholders, and they face the prospect of supporting an artificial-intelligence company through what some believe to be a bubble reminiscent of the dot-com boom and bust. 

Merging SpaceX and xAI represents a level of risk-taking and ambition that is novel even for Musk. The $1.25 trillion value assigned to the new SpaceX is a bet on Musk’s plan for the convergence of AI and space. It is also a wager on unproven technology deployed at a vast scale.

In a memo sent to employees Monday, Musk said starting launches of AI satellites is the company’s immediate focus. SpaceX, xAI and Musk didn’t respond to requests for comment.

New vision

Work on the deal gathered steam around the time Musk won a key victory in November, when Tesla investors endorsed his moonshot $1 trillion pay package, the largest ever for a public-company boss.

Not long after that, members of his inner circle set their sights on an even more audacious target: merging SpaceX and xAI. Combining them had emerged as a priority, people familiar with the deal said, given xAI’s capital needs and SpaceX’s coming IPO.

Some investors in xAI became convinced Musk’s companies should be more intertwined, given the ties the AI firm already had established with them.

Soon enough, SpaceX executives were selling the company’s new focus on AI satellites in discussions with banks and large investors, people familiar with those discussions said. The space company previously told investors it would generate ​​roughly $8 billion in adjusted earnings on $16 billion in revenue in 2025.

For investors, Musk’s corporate maneuvers have often been lucrative: Banks that held underwater debts from his buyout of Twitter were ultimately repaid at around 100 cents on the dollar plus years of high-interest payments.

“You invest with Elon and that is what you get, and if you don’t like it, you leave,” said Ross Gerber, an independent investment adviser and longtime investor in Musk companies, including X and Tesla.

Ties that bind

Musk has previously united disparate corners of his business empire. Last year, he merged X, the social-media company formerly known as Twitter, and xAI into one company valued at an estimated $113 billion. Before the deal, X had also owned a stake in xAI and they did business with each other.

The transaction would ultimately serve as a blueprint of sorts for the tie-up between SpaceX and xAI. 

SpaceX was one of xAI’s earliest enterprise customers. It has been scaling up the internal use of Spok, a tailored version of xAI’s Grok chatbot that has been trained on the space company’s data, according to people familiar with the matter.

Last summer, SpaceX invested in xAI while pressing forward with a busy launch schedule and expanding its Starlink satellite-internet service.

At xAI, contractors broke ground on a second data-center project around Memphis, Tenn. But several executives left Musk’s artificial intelligence startup because of concerns about its management and financial health. Leaders from Valor Equity Partners, which is also a SpaceX investor, got more involved with running the company, the Journal reported.

Behind the scenes, SpaceX had been studying how orbital data centers could work and had a technical breakthrough associated with the technology last fall, the Journal has reported. 

Elon Musk in Davos, Switzerland, last month. World Economic Forum/Avalon/ZUMA Press

Musk began talking more, including on X and at events, about harnessing the sun’s energy to power orbital data centers. On Jan. 21, SpaceX filed documents in Nevada, where xAI is incorporated, to create entities overseen by its finance chief, Bret Johnsen.

Those entities, later used for the merger, carried the name K2, an apparent homage to the Kardashev scale—a theoretical framework that illustrates a civilization’s advancement through energy usage, including from stars. 

The next day, Musk touted his vision for the future of AI data centers in space on stage in Davos, while professionals involved with making the deal happen were getting to work, according to people familiar with the matter.

Bankers at Morgan Stanley, long Musk’s bank of choice, worked on both sides of the deal, a somewhat unusual arrangement, as each company in an M&A deal typically hires its own advisers to ensure it is getting a fair shake. But in this case, Musk controls both companies.

At the high end, the bank said, SpaceX could be valued at as much as $1.26 trillion, far north of the $800 billion valuation it targeted as part of a recent secondary stock sale. They said xAI could be worth as much as $294 billion.

Both companies went for clean, round numbers: SpaceX’s board decided as of Jan. 30 the company was worth $1 trillion, and xAI’s board decided it was worth $250 billion, the investor disclosures show. Morgan Stanley didn’t provide a “fairness opinion” on the valuations, a common feature in some M&A deals to ensure they were reasonable, although it is less common in transactions between private companies.

Morgan Stanley declined to comment.

Sealing the deal

Steve Kaplan, a professor of finance at the University of Chicago’s Booth School of Business, said the transaction reminded him of deals in the dot-com boom, like the $180 billion merger between AOL and Time Warner.

“That’s the thing that’s very hard here,” Kaplan said. “They’ve come up with their valuations and their share exchange rates, and you don’t know how accurate those numbers are, particularly since neither one is public.”

SHARE YOUR THOUGHTS

How valuable do you think the combined SpaceX-xAI company will be? Join the conversation below.

The rationale behind merging two very different companies has been the subject of intense discussion among people close to SpaceX.

Many are supportive of the new vision. They expect the company to frequently launch orbital data centers on Starship, a rocket still under development, similar to how it deployed the largest satellite fleet in history with Starlink on a different SpaceX vehicle. 

However, some SpaceX investors believe xAI investors gained a larger stake in the combined company than they would have preferred. The transaction is handing xAI investors a roughly 20% stake in the combined company. 

On a call with investors on Monday, SpaceX representatives including CFO Johnsen confirmed plans to take the company public this summer, according to people familiar with the discussions.

Write to Alexander Saeedy at alexander.saeedy@wsj.com, Corrie Driebusch at corrie.driebusch@wsj.com, Becky Peterson at becky.peterson@wsj.com and Micah Maidenberg at micah.maidenberg@wsj.com

Elon Musk Inc.

More coverage of the billionaire entrepreneur and his businesses, selected by editors

Funding Tesla's AI Future

How Musk Wants to Wire the Human Brain

His Quest to Make Men Great Again

Using His Empire to Kickstart xAI

Musk Has Used Illegal Drugs, Worrying Leaders at Tesla and SpaceX

Musk Is Planning a Texas Utopia—His Own Town

SpaceX Wields Power Over Satellite Rivals to Boost Starlink

Behind Musk’s Management Philosophy

Copyright ©2026 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Already a subscriber? Sign In

Videos

• MARKET-REACTION: Rapid advancements in AI agent technology recently triggered a significant multi-day selloff in technology stocks, erasing approximately $300 billion in market value.
• TECHNOLOGY-EVOLUTION: A new class of long-running AI agents, such as Anthropic’s Claude Opus 4.6, has emerged with the ability to maintain context over extended periods to solve complex problems.
• DISRUPTION-RISK: Investors express concern that specialized software-as-a-service companies may be rendered obsolete as AI agents begin to intercede in established customer relationships.
• AUTONOMOUS-CAPABILITY: Modern AI architectures allow agents to act as planners that dynamically select tools, execute code, and manage workflows without the need for rigid preprogramming.
• VERTICAL-IMPACT: The proficiency of these agents threatens research-intensive sectors like legal and financial services by automating tasks such as drafting, synthesizing research, and data extraction.
• WORKFLOW-COMPRESSION: Enterprise adoption of long-horizon AI is transforming internal operations by collapsing weeks of traditional analysis and development into minutes of execution.
• LABOR-SHIFT: The nature of professional work is transitioning from rote creation to a focus on editing, taste, and high-level judgment as AI handles technical execution.
• STRATEGIC-ADAPTATION: Companies are encouraged to identify unique competitive advantages beyond data provision to survive the shift toward shared AI platforms.

By

Steven Rosenbush

Thomas R. Lechleiter/WSJ

This week’s technology stock selloff, now in its third day, has its roots in a new class of AI agents that emerged a few months ago. These “long-running” agents are still growing in power, too. On Thursday, Anthropic launched an upgraded version of the technology that sparked the selloff. 

Companies need to pay attention.

AI agents have the potential to draw value out of almost every sector of the economy, not just software and data. That isn’t inevitable, though. Companies can use AI to create value of their own, provided they keep pace with technological changes and their downstream impact on business. For those that fall behind, the dreaded bubble may not be what lies within the AI sector, but what exists beyond. 

Investors have been concerned for months that AI could suck the value out of narrowly focused software-as-a-service companies, rendering them mere databases that feed AI agents. It isn’t difficult to see how this new generation of agents that run for longer periods could end up stepping between the customer relationships that SaaS companies have cultivated. It could be similar to the way that Apple extracted the value in mobile communications from hardware-focused incumbents that didn’t get software.

Newsletter Sign-up

WSJ | CIO Journal

The Morning Download delivers daily insights and news on business technology from the CIO Journal team.

Subscribe

Those fears were compounded in November by the growing power of Anthropic’s Claude Code, which builds software with stunning proficiency. On Jan. 12, the company announced Cowork, a research preview feature in Claude’s desktop app that lets users assign multistep tasks to Claude such as organizing files, drafting documents, extracting data from spreadsheets or synthesizing research. Instead of chatting with Claude, users can point it at a folder on their computer and give it an objective.

On Tuesday morning, investors homed in on Anthropic’s Friday announcement that it was adding open-source plug-ins in research preview to Cowork that allow companies to customize and build on Claude. The 11 plug-ins have a range of focus, including the legal profession.

It was sufficient to give them a glimpse into the afterworld of economic life as we know it. To avoid irrelevance in the future, companies will need to think carefully about where their competitive advantage lies in a world of shared AI platforms.

Co-what?

Claude Code and Cowork are products that run on multiple Claude models. On Thursday, Anthropic announced a new model, Opus 4.6, that it says is a major step up in professional skills and reasoning compared with Opus 4.5 released in November.

As a result of the recent breakthroughs, investors who spent last year debating the existence of an AI bubble started to take AI’s potential more seriously. The Cowork plug-ins were like a match on dry tinder. If AI agents like Cowork can disrupt one research-intensive field such as the law, why not another and another? Suddenly this seemed like a near-term threat, not a speculative problem that’s always five years in the future.

I spoke to Scott White, Anthropic’s head of product for enterprise, to get a better understanding of how these agents operate and how they stand to transform work, companies and markets.

Going long

Claude Code and Cowork are pioneers of an emerging class of long-running AI agents with implications far beyond any one particular sector such as software development.

Unlike previous iterations that generated responses immediately, developers can now specify the level of effort they want Claude to use for a given request. This allows them to assess the complexity of a requested task and determine how hard it needs to think to solve it, White told me.

That’s how the model can engage in “long-horizon” thinking. The fusion of a reasoning model with a capable “harness” allows the model to connect to real systems, execute code and manage workflows, he said. Users can now assign a broad objective to the AI, which will operate autonomously in the background, maintaining context over long horizons. The agent can work for longer periods, but the turnaround time for projects is much faster.

Researchers Alexi Robbins and Jonas Nelle of Cursor said they use Opus 4.5 in conjunction with OpenAI’s GPT-5.2. “When these models were stacked together, they maintained coherence over extremely long horizons, allowing for high degrees of complexity,” Robbins said.

During the development of Cursor’s browser, Robbins said he observed the company’s agent intentionally drawing bright boxes and borders around elements on the webpage that weren’t part of the design, taking screenshots and debugging on its own. “It invented a tool it wasn’t given,” Nelle said.

Rethinking business models

White said these new capabilities are already changing the way he and his colleagues work.

In the past, he wrote documents to convince engineers to build features. Now he uses Claude to build working prototypes to demonstrate viability. The near-instantaneous merging of internal data, web research and customer feedback compresses weeks of analysis into minutes of execution.

LegalZoom takes an agnostic approach to client technology. Thomas Fuller/ZUMA Press

Anthropic designers now write production code to implement their own interfaces, and product managers are performing complex data-science tasks that previously required specialists, he said.

Work is changing at three levels, White said. Individuals are becoming more capable and productive and companies are tearing down historical workflows from marketing to compliance, reducing turnaround times. “Lastly, businesses are changing how they think about what they’re going to look like, what products they want to build,” White said. “Building new things is so much more approachable for businesses, introducing new revenue lines.”

LegalZoom CEO Jeff Stibel said he approaches AI as an accelerant for his business and so-called Main Street companies. The online legal-services platform has an in-house law firm and an independent network of more than 1,000 attorneys, as well as concierge service agents. It also takes an agnostic approach to client technology.

In Stibel’s view, AI makes it easier to start a business, driving clients to specialized services that support them. LegalZoom is moving from a search-and-answer approach to an emphasis on execution and a broader solution that clients trust.

“AI provides the insight, but LegalZoom provides the trusted solution,” he said.

A new architecture

The arrival of long-running agents marks a sudden advance in the design of AI systems. To grasp their potential implications, it is helpful to understand something about their architecture. I turned to Alex Salazar, co-founder and CEO of San Francisco-based AI startup Arcade.dev, for insight.

In the old days, before Thanksgiving, he said, a developer might have prompted a chatbot by saying, “You are an accounting agent; here is the enterprise resource planning tool.”

The new architecture allows the user to assign the agent a higher-level goal, such as “check depreciation schedules.” The model, acting as a planner, “dynamically decides which skills and tools it needs to solve the problem, iterates on the plan, and executes it without rigid preprogramming,” Salazar said.

This allows for caching or storing more information in dedicated memory, which makes the agents faster and cheaper because they don’t have to reprocess the same data for every single interaction, according to Salazar.

“This shifts the nature of work from creation to editing,” he said. He maintains that junior employees must pivot from being the “writer” to the “editor” driving the agent. “The skill set of the future is not syntax or rote creation, but taste and judgment,” he said.

And fears about the disappearance of entry-level work notwithstanding, Salazar said junior employees entering the workforce now, who have a native grasp of AI tools, will likely outperform senior employees who insist on doing the grunt work manually.

If long-running agents realize even part of this potential, the impact on the economy will be huge. This week’s selloff suggests that investors are beginning to take that prospect much more seriously.

Write to Steven Rosenbush at steven.rosenbush@wsj.com

Copyright ©2026 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

What to Read Next

[

The World’s First Viral AI Assistant Has Arrived, and Things Are Getting Weird

](https://www.wsj.com/tech/ai/openclaw-ai-agents-moltbook-social-network-5b79ad65?mod=WTRN_pos1)

[

People created their own AI agents using an open-source project called OpenClaw. Then the AI agents started talking to one another.

](https://www.wsj.com/tech/ai/openclaw-ai-agents-moltbook-social-network-5b79ad65?mod=WTRN_pos1)

Continue To Article

[

What You Need to Know About the AI Models Rattling Markets

](https://www.wsj.com/tech/ai/what-you-need-to-know-about-the-ai-models-rattling-markets-42ee512e?mod=WTRN_pos2)

[

Rapidly expanding artificial-intelligence capabilities helped erase $300 billion in market value on Tuesday.

](https://www.wsj.com/tech/ai/what-you-need-to-know-about-the-ai-models-rattling-markets-42ee512e?mod=WTRN_pos2)

Continue To Article

[

AI Won’t Kill the Software Business, Just Its Growth Story

](https://www.wsj.com/tech/ai/ai-wont-kill-the-software-business-just-its-growth-story-05673e07?mod=WTRN_pos4)

[

Fears that software companies are facing an extinction event are exaggerated, but other dangers are real.

](https://www.wsj.com/tech/ai/ai-wont-kill-the-software-business-just-its-growth-story-05673e07?mod=WTRN_pos4)

Continue To Article

[

Tech, Media & Telecom Roundup: Market Talk

](https://www.wsj.com/business/tech-media-telecom-roundup-market-talk-0f11b2c2?mod=WTRN_pos5)

[

Find insight on software stocks, Super Micro Computer and more in the latest Market Talks covering Technology, Media and Telecom.

](https://www.wsj.com/business/tech-media-telecom-roundup-market-talk-0f11b2c2?mod=WTRN_pos5)

Continue To Article

[

Threat of New AI Tools Wipes $300 Billion Off Software and Data Stocks

](https://www.wsj.com/finance/investing/software-slump-drags-down-private-fund-managers-6f840d0c?mod=WTRN_pos6)

[

From <a href="http://Legalzoom.com" rel="nofollow">Legalzoom.com</a> and Expedia to Ares and Apollo, shares of companies that sell or invest in software fell sharply on Tuesday.

](https://www.wsj.com/finance/investing/software-slump-drags-down-private-fund-managers-6f840d0c?mod=WTRN_pos6)

Continue To Article

[

Microsoft’s Pivotal AI Product Is Running Into Big Problems

](https://www.wsj.com/tech/ai/microsofts-pivotal-ai-product-is-running-into-big-problems-ce235b28?mod=WTRN_pos7)

[

After leaning on its partnership with OpenAI, Microsoft is playing catch-up in the chatbot race. But data shows that it is losing ground with users.

](https://www.wsj.com/tech/ai/microsofts-pivotal-ai-product-is-running-into-big-problems-ce235b28?mod=WTRN_pos7)

Continue To Article

[

Software ate the world. Now, Wall Street is worried AI will eat software.

](https://www.marketwatch.com/story/software-ate-the-world-now-wall-street-is-worried-ai-will-eat-software-88661ed5?mod=WTRN_pos8)

[

Investors have quickly moved to sell shares of companies that looked like they could be on the menu

](https://www.marketwatch.com/story/software-ate-the-world-now-wall-street-is-worried-ai-will-eat-software-88661ed5?mod=WTRN_pos8)

Continue To Article

[

Inventory Recovery Has ‘Lost Steam’ in the U.S.

](https://www.mansionglobal.com/articles/inventory-recovery-has-lost-steam-in-the-u-s-9c60cf23?mod=WTRN_pos9)

[

Despite more listings on the market, housing supply is 17.2% below typical pre-pandemic levels, according to <a href="http://Realtor.com" rel="nofollow">Realtor.com</a>

](https://www.mansionglobal.com/articles/inventory-recovery-has-lost-steam-in-the-u-s-9c60cf23?mod=WTRN_pos9)

Continue To Article

• Regulatory Expansion: The European Union’s Digital Services Act (DSA) grants the European Commission broad authority to enforce speech regulations on a global scale.
• Fine Structure: The Commission possesses the power to levy financial penalties of up to 6% of a platform's total global annual revenue for noncompliance.
• Judicial Convergence: Under the DSA framework, the European Commission serves as both the investigative prosecutor and the final judge in regulatory disputes.
• Enforcement Actions: X (formerly Twitter) was issued the first fine under the DSA following a previously confidential 184-page decision released by the U.S. House Judiciary Committee.
• Blue Checkmark Dispute: Regulators interpreted X’s verification system as a violation of Article 25, suggesting it impairs the ability of users to reach "free and informed" conclusions.
• Burden of Proof: The Commission’s findings against X relied on academic papers with small sample sizes, news articles, and a blog post from a company currently banned in the U.S.
• Targeted Calculations: Fines against X were calculated based on the collective revenue of all entities controlled by Elon Musk rather than the platform's independent revenue.
• Strategic Mandates: The DSA requires platforms to grant researchers access to internal data, which facilitates external investigations into information manipulation and illegal content.

By

Megan K. Jacobson

8

Zuma Press

The psychological concepts of projection and reaction formation explain a lot about today’s politics. People loudly insist they’re determined to protect liberal democracy while advocating policies that would trample it. So it is with the European Union’s Digital Services Act.

The U.S. House Judiciary Committee last week released the EU’s previously secret full decision to issue the first fine under the DSA to X (formerly Twitter) in December. It confirms what critics have warned: This law threatens everyone’s basic liberties.

Yes, everyone’s—even those far from Europe. The sprawling 2022 law pushes social-media platforms to enforce European speech laws worldwide. Its supporters portray it as a technocratic, “content neutral” measure to ensure democratically enacted EU member states’ laws are applied justly. The European Commission asserts that the DSA’s “main goal” is to “create a digital space that respects citizens and consumers’ fundamental rights” by “establishing a clear set of rules across the EU.”

One of the most dangerous parts of the DSA is the massive power it hands to the commission, the EU’s international regulatory arm. While much of EU regulatory enforcement occurs at the national level, which is more accountable to voters, the DSA empowers the commission to investigate platforms and levy fines of up to 6% of their global annual revenue for each violation. In these investigations, the commission acts as both prosecutor and judge—accusing companies of noncompliance under a broad, ambiguous law, then deciding if companies’ answers are enough to disprove the allegations. An American court would strike down such a law as both unconstitutionally vague and a travesty of due process.

The EU portrays the commission as a neutral administrator. Its 12-paragraph public explanation of its decision to fine X in December seemed consistent with that. The three violations sounded technical: X’s current practice of minimally verifying blue-checkmark “verified” users’ identities is deceptive; X hasn’t adequately provided a public, searchable repository of all its advertising content as the DSA requires; and X isn’t giving qualified researchers the access to its data that the law also mandates.

But the 184-page decision that American lawmakers made public shows the commission acting like a petty despot, with little if any regard for due process.

The decision relies on some stunning interpretations of law. It claims that X’s blue checkmarks violate the DSA’s Article 25, which says “online platforms shall not design, organise or operate their online interfaces” in a way that “impairs” users’ abilities to “make free and informed decisions.” The commission’s definition of “decisions” turns out to include mere thoughts: whether users believe an account is authentic on a platform “advertising itself as a source for information and news.” As X protests in its response, the commission’s broad interpretation of Article 25 puts “at risk virtually every online interface implemented by every platform.”

Perhaps the commission has access to reliable psychics it doesn’t disclose, but the evidence it does cite as its main basis for finding X’s blue checkmarks noncompliant is laughable: a paper by a professor and three graduate students with tiny sample sizes, a dozen or so news articles critical of X, interviews with a former Twitter employee, and a blog post by a Russian cybersecurity company that the Biden administration banned from the U.S. market over national-security concerns.

The decision overall gives a sense that the investigators’ conclusion was preordained. It asserts that because all of X’s “alleged infringements were self-explanatory,” the commission “primarily relied on gathering its own evidence.” To ascertain whether X screened researchers’ applications for its data too strictly, the commission reviewed 12 applications, four of them “in depth”—tiny numbers given that X received 151 research requests in a single two-month period.

All this gives the decision a “Get Hoffa” tone. Elon Musk has been a thorn in the side of the commission with his forthright commitment to free speech. Though the commission’s decision doesn’t order X to perform any censorship, it does arm the commission with deadly force against X over speech restrictions in the future. It is still assessing whether X fails to combat “information manipulation” and to take down “illegal content.”

Thanks to the December decision, the commission can now bring—alongside any allegations of “hate speech” or “misinformation”—the threat of financial ruin. Though the fines in this case came to a mere €120 million, the commission based that figure not on X’s revenue but on that of Mr. Musk and “all legal entities directly or indirectly controlled by” him. That means a single future fine could be north of $6 billion—or more than 200% of X’s reported annual revenue.

The commission further raised the pressure for X to give in on censorship by ordering it to give researchers easier access to its data, particularly for those investigating general “misinformation”—though the legal basis for this is questionable. This will make it much easier for pro-censorship figures—such as those the U.S. State Department banned from the country in December—to find fodder to support demands for the removal of content.

Unless Washington or sensible European voices push back against the commission, platforms and those of us who enjoy free online expression are largely at its whim. Let’s hope someone on either side of the Atlantic cares about preserving actual liberal democracy.

Ms. Jacobson is an assistant editorial features editor at the Journal.

Free Expression: A Daily Newsletter From WSJ Opinion

Get the Newsletter

About Free Expression

Opinion | ‘Bluey’ Is the Most Conservative Show on TV

Opinion | George Mitchell Gets Kneecapped by the Epstein Files

Grammy Silence on Iran

Copyright ©2026 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

What to Read Next

opinion

[

Opinion: Government Won’t Help the AI Job Transition

](https://www.wsj.com/opinion/government-wont-help-the-ai-job-transition-34f17103?mod=WTRN_pos1)

[

These safety nets have failed in the past and have the potential to idle millions of workers.

](https://www.wsj.com/opinion/government-wont-help-the-ai-job-transition-34f17103?mod=WTRN_pos1)

Continue To Article

opinion

[

Opinion: Small Companies Still Handing Out Raises

](https://www.wsj.com/opinion/small-companies-still-handing-out-raises-4cf88488?mod=WTRN_pos2)

[

The latest NFIB report arrives with a new employment index.

](https://www.wsj.com/opinion/small-companies-still-handing-out-raises-4cf88488?mod=WTRN_pos2)

Continue To Article

opinion

[

Opinion: Black History Is American History

](https://www.wsj.com/opinion/black-history-is-american-history-e59da570?mod=WTRN_pos4)

[

It deserves complete integration, not a specially designated month.

](https://www.wsj.com/opinion/black-history-is-american-history-e59da570?mod=WTRN_pos4)

Continue To Article

opinion

[

Opinion: Are Trump’s Tariffs Winning?

](https://www.wsj.com/opinion/donald-trump-tariffs-trade-evidence-8b77dc92?mod=WTRN_pos5)

[

He says yes, but let’s look at the evidence that voters feel judging by their views of the economy.

](https://www.wsj.com/opinion/donald-trump-tariffs-trade-evidence-8b77dc92?mod=WTRN_pos5)

Continue To Article

opinion

[

Opinion: Netflix Gets a Beltway Beating

](https://www.wsj.com/opinion/netflix-ted-sarandos-senate-hearing-antitrust-aaadd7bc?mod=WTRN_pos6)

[

Politicians in both parties want to use antitrust policy as a political weapon.

](https://www.wsj.com/opinion/netflix-ted-sarandos-senate-hearing-antitrust-aaadd7bc?mod=WTRN_pos6)

Continue To Article

opinion

[

Opinion: Japan’s Low-Energy, High-Impact Election

](https://www.wsj.com/opinion/japan-snap-elections-sanae-takaichi-economy-china-c9c20ed7?mod=WTRN_pos7)

[

A Takaichi win would send Beijing a message but not fix the economy.

](https://www.wsj.com/opinion/japan-snap-elections-sanae-takaichi-economy-china-c9c20ed7?mod=WTRN_pos7)

Continue To Article

opinion

[

Opinion: Epstein, Peter Mandelson and the Labour Party

](https://www.wsj.com/opinion/epstein-peter-mandelson-and-the-labour-party-fd5f5bc2?mod=WTRN_pos8)

[

Messages detail the ties between Keir Starmer’s former ambassador and the late sex offender.

](https://www.wsj.com/opinion/epstein-peter-mandelson-and-the-labour-party-fd5f5bc2?mod=WTRN_pos8)

Continue To Article

opinion

[

Opinion: Social Media Bans for Kids Fuel Censorship for Adults

](https://www.wsj.com/opinion/social-media-bans-for-kids-fuel-censorship-for-adults-50926c65?mod=WTRN_pos9)

[

I like the idea, but I don’t trust my government to implement it without violating free speech.

](https://www.wsj.com/opinion/social-media-bans-for-kids-fuel-censorship-for-adults-50926c65?mod=WTRN_pos9)

Continue To Article

Videos

• MARKET_VOLATILITY: Significant stock price declines occurred for financial data providers like S&P Global, MSCI, and London Stock Exchange Group following new AI product announcements.
• ANTHROPIC_INNOVATION: The introduction of a legal plug-in and coding tools for the Claude-powered Cowork assistant triggered concerns over automated professional services.
• SECTOR_DISRUPTION: Traditional business models relying on proprietary financial data sales are facing increased competition from generative AI capabilities.
• GLOBAL_IMPACT: The selloff extended beyond Western firms to affect major international outsourcing and consulting companies such as Infosys and Tata Consultancy Services.
• INVESTOR_SENTIMENT: A broader downturn in the software sector has intensified as capital managers like Apollo Asset Management increasingly avoid the industry due to AI risks.
• DATA_DEFENSE: Executives from established data firms maintain that proprietary, real-time information feeds remain essential and cannot be fully replicated by AI models.
• CONTRARIAN_PERSPECTIVE: Nvidia CEO Jensen Huang characterized the belief that AI will entirely replace existing software infrastructure as illogical and unlikely.
• CAPITAL_EROSION: Expanding artificial intelligence capabilities contributed to a market value loss of approximately $300 billion across the software and data sectors in a single week.

By

Alexander Osipovich

and

Ben Dummett

Feb. 4, 2026 8:14 am ET

62

You may also like

Up Next

Embed code copied to clipboard

[Facebook](https://www.facebook.com/sharer/sharer.php?u=https://www.wsj.com/video/dario-amodei-on-safety-job-displacement-and-anthropic-350b-valuation/BF1E2311-6F73-4EFB-883E-916D2EFA74A1&t=Dario Amodei on Safety, Job Displacement and Anthropic's $350B Valuation "Share on Facebook")

[Twitter](https://twitter.com/intent/tweet?url=https://www.wsj.com/video/dario-amodei-on-safety-job-displacement-and-anthropic-350b-valuation/BF1E2311-6F73-4EFB-883E-916D2EFA74A1&text=Dario Amodei on Safety, Job Displacement and Anthropic's $350B Valuation "Share on Twitter")

Your browser does not support HTML5 video.

0:00

Paused

0:00 / 31:43

Interviewed by WSJ Editor in Chief Emma Tucker at the World Economic Forum in January, Anthropic’s Dario Amodei discussed topics including the fields most at risk of AI-driven employment disruption, and the state of safety in AI development. Photo: Maurizio Martorana for WSJ

For years it seemed like a surefire business model: amass vast troves of financial data and sell it to Wall Street for a premium. Then Claude came along.

Shares of companies such as S&P Global, MSCI, Intercontinental Exchange, London Stock Exchange Group LSEG -1.98%decrease; red down pointing triangle and FactSet Research Systems FDS -3.42%decrease; red down pointing triangle all tumbled this week after fast-growing artificial-intelligence startup Anthropic unveiled a new suite of tools for automating legal tasks.

The new legal plug-in for Anthropic’s Cowork assistant, powered by its AI model Claude, didn’t seem to have much to do with financial data. Nonetheless, LSEG—which has spent years pivoting away from its traditional stock-exchange business to selling data and analytics—slid 13% on Tuesday, and its shares dropped further Wednesday morning.

S&P Global and FactSet were also hit with double-digit losses on Tuesday, while ICE and MSCI both fell more than 5%.

The losses highlighted the expanding threat of AI-driven disruption for financial services and the white-collar professionals who work in the sector.

In recent months, the sophistication of a new Claude-based tool for writing code rattled software engineers and raised concern about its impact on the broader tech industry. Anthropic’s rollout of new legal tools added to similar fears for lawyers and hit the stock of companies that run legal-research databases, such as Thomson Reuters.

The selloff rippled out into a swath of other companies, as investors assessed which businesses are next in line for disruption by AI.

“The market has cast a very broad net as to which companies can be exposed to AI risk,” said UBS analyst Michael Werner. “You don’t have to be in the crosshairs of this particular AI risk. You can be in the periphery.”

The rout has expanded to other corners of the software industry, such as outsourcing, where AI tools could reduce the need for human consultants. In India, shares of Infosys and Tata Consultancy Services both fell around 7% on Wednesday.

The drop this week isn’t completely out of the blue. Investors had been souring on the software sector since late last year, months before this week’s action. The price of the iShares Expanded Tech-Software Exchange-Traded Fund peaked in September and had slumped by nearly one-quarter before Tuesday.

“Is software dead” is the biggest question that investors should be asking themselves about the fallout from AI, Apollo Asset Management co-president John Zito said at a conference last fall. Apollo has largely been avoiding the software sector for months. 

Not everyone thinks the selloff makes sense.

Nvidia Chief Executive Jensen Huang said late Tuesday at an event hosted by Cisco that it makes sense for AI to use existing tools to accomplish tasks, rather than reinventing them. “Would you use a hammer or invent a new hammer?” he asked.

“There’s a whole bunch of software companies whose stock prices are under a lot of pressure because somehow AI is going to replace them,” Huang said. “It is the most illogical thing in the world.”

Financial-data providers might seem like an unlikely target for AI-driven disruption, since many of the biggest ones derive their value from proprietary access to data and information feeds used by bankers and traders.

That had seemed like an impregnable advantage for S&P Global. Besides its well-known credit-ratings business, the New York-based company makes money by selling data products ranging from stock-market indexes to oil-price feeds to insurance-industry analytics.

Its share price soared more than fivefold in the decade ending in 2025, outpacing its own S&P 500 index, which roughly tripled over the same period. So far this year S&P Global is down around 10%, including Tuesday’s losses.

Lucrative opportunities in data attracted exchange operators, which saw subscription-based services as a way to earn stable recurring revenues. 

LSEG pursued a costly acquisition of Refinitiv Holdings in an effort to challenge data-terminal powerhouse Bloomberg. Intercontinental Exchange grew its data business in areas such as bonds, mortgages and even trading signals based on the chatter in Reddit forums.

Spokespeople for LSEG, ICE and S&P Global declined to comment. FactSet and MSCI didn’t immediately respond to requests for comment.

Such companies have argued that, if anything, AI would increase the value of their services, making it easier to extract business insights and trading opportunities from the raw material of their data. Companies with proprietary data feeds say even AI tools must use the underlying information they provide to track the markets.

“AI cannot replicate or replace our real-time data,” LSEG Chief Executive David Schwimmer said in October.

Write to Alexander Osipovich at alexo@wsj.com and Ben Dummett at ben.dummett@wsj.com

Corrections & Amplifications
Tata Consultancy Services was misspelled as Tata Consulting Services in an earlier version of this article. (Corrected on Feb. 4)

Watch: WSJ Interviews Anthropic’s CEO in Davos

Fears about new developments in artificial intelligence swept through the stock market on Tuesday. Richard Drew/AP

Copyright ©2026 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

What to Read Next

[

Threat of New AI Tools Wipes $300 Billion Off Software and Data Stocks

](https://www.wsj.com/finance/investing/software-slump-drags-down-private-fund-managers-6f840d0c?mod=WTRN_pos1)

[

From <a href="http://Legalzoom.com" rel="nofollow">Legalzoom.com</a> and Expedia to Ares and Apollo, shares of companies that sell or invest in software fell sharply on Tuesday.

](https://www.wsj.com/finance/investing/software-slump-drags-down-private-fund-managers-6f840d0c?mod=WTRN_pos1)

Continue To Article

[

What You Need to Know About the AI Models Rattling Markets

](https://www.wsj.com/tech/ai/what-you-need-to-know-about-the-ai-models-rattling-markets-42ee512e?mod=WTRN_pos2)

[

Rapidly expanding artificial-intelligence capabilities helped erase $300 billion in market value on Tuesday.

](https://www.wsj.com/tech/ai/what-you-need-to-know-about-the-ai-models-rattling-markets-42ee512e?mod=WTRN_pos2)

Continue To Article

[

Financial Services Roundup: Market Talk

](https://www.wsj.com/articles/financial-services-roundup-market-talk-5b757b5e?mod=WTRN_pos4)

[

Find insight on Commonwealth Bank of Australia, buyout funds and more in the latest Market Talks covering Financial Services.

](https://www.wsj.com/articles/financial-services-roundup-market-talk-5b757b5e?mod=WTRN_pos4)

Continue To Article

[

RELX, Wolters Kluwer Shares Plunge on AI Competition Fears

](https://www.wsj.com/tech/ai/relx-wolters-kluwer-shares-plunge-on-ai-competition-fears-306d616e?mod=WTRN_pos5)

[

Shares in European legal publishing companies plunged Tuesday as investors reacted to newly released tools from artificial-intelligence provider Anthropic.

](https://www.wsj.com/tech/ai/relx-wolters-kluwer-shares-plunge-on-ai-competition-fears-306d616e?mod=WTRN_pos5)

Continue To Article

[

Finance Leaders Weigh In on Trump, the Fed, Investing and AI Risk

](https://www.wsj.com/finance/investing/wsj-invest-live-event-kicks-off-with-peltz-griffin-interviews-39e12d5d?mod=WTRN_pos6)

[

The WSJ Invest Live event featured Citadel CEO Ken Griffin, Trian CEO Nelson Peltz and more.

](https://www.wsj.com/finance/investing/wsj-invest-live-event-kicks-off-with-peltz-griffin-interviews-39e12d5d?mod=WTRN_pos6)

Continue To Article

[

Tech, Media & Telecom Roundup: Market Talk

](https://www.wsj.com/business/tech-media-telecom-roundup-market-talk-1bc5ae53?mod=WTRN_pos7)

[

Find insight on Verizon, Siltronic, SpaceX and more in the latest Market Talks covering Technology, Media and Telecom.

](https://www.wsj.com/business/tech-media-telecom-roundup-market-talk-1bc5ae53?mod=WTRN_pos7)

Continue To Article

[

Why Gartner and other IT stocks got slammed on Tuesday

](https://www.marketwatch.com/story/why-gartner-and-other-it-stocks-got-slammed-on-tuesday-d0c74924?mod=WTRN_pos8)

[

Gartner says customers are “slowing and deferring everything possible” as they make sense of a shifting AI landscape.

](https://www.marketwatch.com/story/why-gartner-and-other-it-stocks-got-slammed-on-tuesday-d0c74924?mod=WTRN_pos8)

Continue To Article

[

A Century-Old Home—With a Japanese Soaking Pool and Hidden Room—on Lake Michigan’s ‘Art Coast’

](https://www.mansionglobal.com/articles/a-century-old-homewith-a-japanese-soaking-pool-and-hidden-roomon-lake-michigans-art-coast-15e49bb6?mod=WTRN_pos9)

[

The compound, which includes the historic main residence and a guest house, stands minutes from Fennville, a fast-growing resort town

](https://www.mansionglobal.com/articles/a-century-old-homewith-a-japanese-soaking-pool-and-hidden-roomon-lake-michigans-art-coast-15e49bb6?mod=WTRN_pos9)

Continue To Article

Videos