(Bloomberg) — Asian software stocks slid, extending a global selloff as investors fret that rapid advances in artificial intelligence could upend traditional business models.

Cloud-based accounting software maker Xero (XRO.AX, XROLF) slid 16% in Sydney, the most since 2013. Japan’s TIS Inc. (3626.T, TISNF) and Hong Kong-listed Kingdee International Software Group Co. (KGDEF) slumped as much as 16%. Among larger names, Indian information technology firms Tata Consultancy Services Ltd. (TCS.BO) and Infosys Ltd. (HCL-INSYS.NS) dropped at least 7% each.

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Anthropic PBC’s (ANTH.PVT) new AI tool spurred a big rout Tuesday across a wide swath of stocks in the US and Europe, where AI displacement fears have weighed on the broader markets. Losses were more contained in Asia, where the tech sector remains dominated by hardware makers — particularly chipmakers — that have been key beneficiaries of the AI investment boom.

“Asia’s technology sector appears better positioned during this period of uncertainty supported by its heavier weighting toward hardware, where earnings momentum remains strong,” said Gary Tan, a portfolio manager at Allspring Global Investments.

China took a bigger hit, with software-related firms leading the Hang Seng Tech Index (HSTECH.HK) to a fifth day of decline. Internet giant Tencent Holdings Ltd. (0700.HK, TCEHY) was the largest drag, dipping nearly 4%. Still, investors and analysts expect limited damage for the region.

“Pure software in Hong Kong and China remains a relatively small component of market indices compared to the US and Europe,” said Allspring’s Tan. Business is less likely to be disrupted as well, since “many US foundational models have limited access to China’s domestic market.”

Asian equities held up well overall, with MSCI Inc.’s broadest regional gauge trading little changed on the day. South Korea’s Kospi extended gains to a fresh record high, and memory chipmaker Samsung Electronics Co. reversed an intraday loss. Taiwan’s Taiex index also closed in the green.

The biggest hits were seen among software-as-a-service firms, such as the 13% drop in Japan’s Rakus Co. and 11% slide in Australia’s Wisetech Global Ltd.

“This is especially worrying for software companies as it has the potential to decimate their models with AI likely able to fully replace traditional workflow lock-in SaaS products,” Ortus Advisors analyst Andrew Jackson wrote in a note.

The larger uptrend for the region’s tech stocks is seen still intact. Asian hardware makers offer better earnings visibility as recipients of much of the spending required to build global AI infrastructure, according to analysts.

“The recent selloff in US and European software companies has been triggered by concerns around AI disrupting traditional services,” said Fabien Yip, market analyst at IG. In contrast, “many Asian tech firms sit upstream in the AI value chain as memory chip, foundry or materials providers.”

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