Anthropic's latest AI tool was seen by the legal software industry as a 'shot across the bow.' Here's what it means.

• Anthropic is taking a bite out of the legal software market with a new AI tool.
• That sent legal software stocks tumbling. Thomson Reuters and RLEX lost about 20% in recent days.
• Business Insider asked industry insiders what Anthropic's latest tool means for legal tech.

A new tool from Anthropic is stoking debate over whether AI will replace existing software that has dominated the legal sector for years.

The release of Anthropic's Cowork legal plugin sparked a steep sell-off in legal software stocks. Shares of Thomson Reuters and RLEX, makers of legal software, dropped about 15% each on Tuesday. Both stocks recovered slightly on Wednesday, though they remain fervently in the red for the week.

The slump isn't really about one Claude plugin. It pokes at a deeper question: If AI models become good enough for lawyers, will anyone need traditional legal software?

On one side are the two companies that have ruled legal tech for decades: Thomson Reuters and LexisNexis. They argue that lawyers will keep buying their software tools because their AI features are grounded in a walled garden of vetted case law, statutes, and editorial content. They claim less hallucination risk and fewer career-ending mistakes.

On the other side are the fast-rising startups, such as Harvey and Legora, and foundation model companies. They're betting lawyers will accept — or learn to manage — more risk in exchange for speed, flexibility, and tools that feel closer to a true "virtual associate" than a smarter search box.

This week's market reaction suggests investors are starting to price in an uncomfortable possibility: a new wave of competitors is finally pushing into a corner of the legal market that hasn't faced a real challenger in decades.

Analysts at William Blair & Co. wrote in a note to clients on Wednesday that Anthropic's entry into the legal market brings "a structural concern" about the relevancy and "moats of information services names under this new AI paradigm."

'1,000 ships'

If you work in legal, it was hard to open LinkedIn over the past 24 hours without running into a wall of hot takes about Anthropic's new plugin.

One legal-tech startup employee described it to Business Insider as "the Claude announcement that launched 1,000 ships."

Zachary Amron, deputy general counsel at the tech company Valon, said it's only a matter of time before Anthropic ships more legal-specific tools. Anthropic has not said publicly if it plans to go deeper in legal.

'Very raw'

Not everyone in legal tech is panicking. At GC AI, a startup that builds software for in-house legal teams rather than law firms, the mood was closer to a shrug.

In an internal memo seen by Business Insider, founder Cecilia Ziniti told employees that Anthropic's legal plugin was "very raw and not a threat to us."

Ziniti's broader point was that foundation models may be powerful, but they're still just infrastructure. "Claude gives people a great engine," she wrote. "We already have one in our car. But does that suddenly mean everyone is going to assemble their own cars in their garage? Do you change your own oil? No."

The analogy mirrors a familiar pattern in tech. Amazon Web Services offers services that are similar to those sold by software companies, including many software-as-a-service companies that run on AWS's cloud. And yet, the specialized software vendors are often still more popular. Trust and experience still command a premium.

Ziniti sounded unbothered about Anthropic's impact on her own business. She was less charitable about the outcome for legacy vendors, and said the sell-off in Thomson Reuters and RLEX made sense to her.

"They make horses," she wrote. "The tech now is cars."

Others saw the Anthropic launch less as a threat than as a demand generator.

Logan Brown, a former Cooley lawyer who now runs a company, Soxton, that provides legal services to startups, said interest in her business spiked almost immediately after Anthropic's legal plugin dropped. She described a deluge of LinkedIn messages from investors betting her company would be among the survivors, because, Brown said, it serves founders, not lawyers, who don't want to gamble on legal paperwork.

Some lawyers are stress-testing Anthropic's Claude chatbot in their day-to-day work.

Amron, the Valon in-house lawyer, said he was already using Claude to assist with contract review. He vibe-coded a skill that compares versions of an agreement, drops the changes into a chart, and flags whether each revision helps or hurts the company.

On Tuesday night, Amron asked Claude to demo the new legal plugin for him. It generated a mock contract and walked through how it would review it.

When the lawyer skimmed the underlying code, he noticed the system tried to pull information from Wikipedia. He wasn't impressed.

Have a tip? Contact this reporter via email at mrussell@businessinsider.com or Signal at @MeliaRussell.01. Use a personal email address and a non-work device. This reporter's husband works at Valon.