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A massive sell-off rippled through software, real estate and trucking stocks last week as investors worried that artificial intelligence could upend some industries — and analysts say the sharp falls may not be over yet.
Software stocks were the first to bear the brunt of AI disruption. But those fears quickly spread to insurance companies, brokerage firms, real estate services, even logistics and trucking.
“The market is in ‘shoot first, ask questions later’ mode, and any names/sectors that might be affected by AI disruptions will take a hit,” Mohit Kumar, strategist at Jefferies, said in a note.
The fall in stocks portends a major change for investors going forward: AI, which has been fueling big rallies in tech and other stocks for months, could now weigh on parts of the market.
Shares of major insurance brokers fell on February 9 after Madrid startup Tuio unveiled a new insurance app built with ChatGPT, according to UBS.
This has sparked fears that AI tools could eat into the business models and customer base of existing companies. Stocks of professional services and insurance companies fell. Swamp Actions (MRSH) fell 7.5%. Actions of Arthur J. Gallagher (AJG) fell 9.85%.
But Brian Meredith, an analyst at UBS, said in a note that he thought the selloff was “significantly overdone,” noting that insurance brokers remain “critical intermediaries” for household financial decisions, and that AI is unlikely to ultimately upend the industry.
Tuesday, the technology startup Altruist announcement a new tax planning feature for Hazel, the company’s AI tool. This has fueled fears that specialist client services offered by brokerage and wealth management firms will face increased competition.
Charles Schwab (SCHW) shares fell 7.42% on Tuesday. Shares of financial services company LPL Financial (LPLA) and Raymond James (RJF) fell by 8.75% and 8.31% respectively.
Real estate services found themselves in the barrel on Wednesday and Thursday.
Cushman & Wakefield shares (CWK) fell 13.8% on Wednesday and 11.5% on Thursday. Shares of real estate services companies CBRE Group (CBRE) fell 12.2% and 8.8% over the two days. Jones Lang LaSalle (JLL) fell by 12.5% and 7.6%.
“We believe investors are scrutinizing expensive, labor-intensive business models as potentially vulnerable to AI-driven disruption,” Jade Rahmani, an analyst at Keefe, Bruette & Woods, said in a note.
And AI has the potential to not only compete with traditional real estate brokers and agents, but also reduce demand for office space in general, as AI executives predict their technology will eliminate entire swaths of the economy.
“If there are fewer office workers in the long term because of AI, there will be less demand for office space,” Bob Sulentic, CBRE Group managing director, said during the company’s earnings conference call Thursday morning. “This would be a long-term trend that would develop. »
The Dow Jones Transportation Average – an index of 20 transportation sector companies – fell 4% on Thursday and had its worst day since April.
The culprit was Algorhythm Holdings, which announcement a new tool that could improve efficiency and better optimize trucking activity.
The reaction was rapid: the actions of RXO (RXO), a freight company, fell 20.45% on Thursday. Shares of logistics company CH Robinson Worldwide (CHRW) fell 14.54%.
“While perceptions of artificial intelligence influence recent market activity, CH Robinson has been a leader in the AI space for over a decade and we believe AI will only continue to strengthen our performance and widen our competitive gap,” CH Robinson said in a statement. statement.
Algorhym’s announcement was all the more surprising given that the company once specialized in selling karaoke machines before transforming into an AI and logistics company.
“The fact that a $6 million market cap company, until recently specializing in karaoke, helped wipe tens of billions of dollars from logistics stocks to deepen weakness is perhaps indicative of the current state of markets,” Jim Reid, global head of macro research at Deutsche Bank, said in a note.
Algorithm actions (RHYME) rose almost 30% last week.
Angelo Kourkafas, senior global strategist at Edward Jones, told CNN that “fear of AI disruption” has been a dominant theme in markets over the past two weeks. But the ripples currently permeating the stock market are themselves based on hypothetical scenarios, he said.
Kourkafas said the fears are more “speculative in nature” than based on immediate, fundamental changes in corporate revenue streams.
“Yes, in the short term there could be concerns about disruption in many different industries, but we know that these companies are actively looking at ways to evolve and offer better platforms, products and services as a result,” Kourkafas said.
But Jonathan Krinsky, chief market technician at BTIG, said in a note Thursday that individual stock movements based on AI nerves are “becoming more and more extreme.”
“At some point…we begin to worry that weakness will outweigh strength and the market as a whole will become vulnerable,” Krinsky wrote.