Chelsea were torn apart in a brutal Etihad showing as Manchester City went back to the top of the Premier League table with a 6-0 win.
Sergio Aguero struck a hat-trick, Raheem Sterling got two and Ilkay Gundogan bagged one himself.
City were 4-0 up at half-time and Souness says in the second half Chelsea gave up.
“They were ruthless, devastating and clinical. City were fabulous,” he said.
“I don’t know how to describe it but I watched the first five minutes and I thought Chelsea would have a real go.
“Some of the goals were avoidable but I was gobsmacked at the end with the way Chelsea seemed to give up. That’s an accusation they will have to deal with from more than me.
“City have put a marker down today that Liverpool have to win every game from hereon in.”
Manchester City went back top after hitting Chelsea for six – 24 hours after Liverpool beat Bournemouth 3-0.
Souness now thinks his old club need to win every game to take the Premier League title.
“Beating Bournemouth has not confirmed they are back at their best,” he said. “This result from City has shown they are bang at it and this is how they will finish the season.
“If that’s their form going into the end of the season, Liiveprool have to win every game. That’s why they are looking at it.
“They’ve won 6-0, it was nearly 50-50 possession but were they really that good?
“I think they were – in the areas that mattered.
“I don’t want to say it – and I know you’ll push me to say it before we come off air – but they are going to take some stopping. Liverpool really will have to win every single game to win that league.
“Looking at them, how clinical they are, they are going to take some stopping if that’s their mood between now and the end.”
Chelsea sit fifth following the mauling at City, with Manchester United and Arsenal either side of them.