While the extreme volatility that greeted the start of the week has calmed, traders remained on edge over the impact of artificial intelligence on companies' bottom lines.

The latest development to spook markets was news that AI startup Anthropic -- which created the Claude chatbot -- had unveiled a tool that could be used by firms to carry out legal work.

Tuesday's announcement hit firms in the software, financial services and asset management industries, though analysts said there has been a general shift by investors out of tech following years of eye-watering gains, and into other industries.

An underwhelming response to earnings from titans including Alphabet, ARM and Microsoft has aided that move, which also comes as questions are raised about the wisdom of pumping hundreds of billions into AI with little idea about the timing of returns.

"The rout reflects growing unease about how quickly AI could disrupt existing business models and whether incumbent software companies can defend their margins," wrote Chris Beauchamp, chief market analyst at IG.

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"Investors are pricing in the risk that new AI-native competitors could undercut pricing and erode market share across the sector."

Fiona Cincotta at City Index said: "Investors rotating into more cyclical names as fears over AI-driven disruption weighed on the market."

And she warned that "while losses in tech continue, sentiment remains fragile".

The rotation was evident in New York, where the tech-heavy Nasdaq shed 1.5 percent while the Dow Jones Industrial Average gained 0.5 percent.

The selling extended into Asia, where Seoul -- which has cruised more than 20 percent to multiple record highs this year thanks to its strong tech presence -- sank more than two percent.

Tokyo, Hong Kong, Shanghai, Sydney, Singapore and Taipei were also down.

"Enthusiasm towards AI has notably waned in recent months, with the market becoming increasingly bifurcated, not only amid concern over how capital expenditures will be financed (with debt-laden firms such as Oracle taking a battering), but also as concerns mount over concentration," said Pepperstone's Michael Brown.

Oil prices fell around two percent after Iran and the United States said nuclear talks would go ahead in Oman this week.

The news soothed investor concerns sparked by a report earlier Wednesday that the bitter foes would not meet owing to a row about the format and the venue, which sent the price of both main contracts up more than three percent.

Bitcoin was going for $72,000 -- its lowest since November 2024 -- after being caught up in the rollercoaster ride earlier this week as investors reconsidered their risk asset holdings.

The cryptocurrency is now down more than 40 percent from its record high above $126,000 touched in October, and Bloomberg said traders are now betting on it falling below $65,000.

Japanese electronics giant Panasonic soared as much as 15 percent in Tokyo at one point after it said it would increase its job cuts to 12,000 as part of a restructuring drive, while also reporting forecast-topping quarterly operating profit.

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