The stock market has been abuzz with the so-called "Claude crash", a phenomenon that has sparked concern and intrigue. This quiet share price crash, occurring amidst the FTSE 100 index's proximity to all-time highs, is a story worth delving into.
The Claude crash refers to the recent launch of plug-in legal products by AI firm Anthropic, added to its Claude Cowork office assistant. This move has sent shockwaves through the market, particularly affecting UK public companies heavily invested in the data sector. Among these, Relx, formerly Reed Elsevier, stands out with its diverse portfolio, including The Lancet and LexisNexis.
Despite Relx's seemingly mundane self-description as a provider of analytics and decision tools, its pre-Claude share price was impressive, reaching £41 in May last year. However, since the introduction of Claude's plug-ins, the shares have halved, sparking fears of a potential profit margin collapse.
But here's where it gets controversial: Relx's full-year results paint a different picture. The company's confidence is evident with revenue and operating profit increases, a strong growth forecast for 2026, and a substantial share buyback of £2.25 billion. CEO Erik Engström further emphasizes that AI evolution will continue to drive customer value and growth.
So, what's the real story behind Relx's data? Some of it is public, some licensed, some proprietary, and all of it is enriched with decades of judgments and interpretations. This unique data is a key asset for professionals and risk assessors, and AI merely assists in its utilization.
Engström's other point is that Relx maintains control over its licensing deals and can continue developing its own products. The company's proprietary information, being impossible to replicate, is its crown jewel.
While the market's reaction resulted in a 2% share price bounce, it also reflects lingering worries about the future of AI and Relx's competitive edge.
And this is the part most people miss: Relx's tactical response should be straightforward. If growth is indeed sustainable, as Engström suggests, and shares are available at a discount, continuing the buyback strategy is a no-brainer.
With this year's buyback plan at £2.25 billion, up from £1.5 billion, Relx is on track to significantly boost earnings per share. Similar strategies are reportedly being advocated by activist investors at LSEG, highlighting the potential benefits of such a move.
So, is Relx's competitive moat as deep as it claims? Only time will tell. But for now, the company's response to the Claude crash seems to be a step in the right direction.
What do you think? Is Relx's strategy a wise move, or is it a sign of something more concerning? Feel free to share your thoughts and opinions in the comments below!
