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Software, real estate and trucking stocks were sold last week as investors worried that artificial intelligence could upend some industries, but analysts say the selloff may not be over yet.
Software stocks were the first to bear the brunt of the AI disruption nerves. But these concerns soon spread to insurance companies, brokerages, real estate services, and even logistics and trucking.
“Markets are in a look ahead, ask questions later mode, and stocks and sectors that could be affected by AI disruption are hurting,” Jefferies strategist Mohit Kumar said in a note.
The slump in stock prices signals to investors that big changes are coming. AI, which has driven big gains in tech and other stocks for months, may now actually be a drag on some parts of the market.
Shares of major insurance brokers fell on February 9 after Madrid-based startup Tuio unveiled a new insurance app built on ChatGPT, according to UBS.
This has raised concerns that AI tools will erode existing companies’ business models and customer bases. Stocks of professional services companies and insurance companies fell. Marsh stock (MRSH) fell 7.5%. Arthur J. Gallagher stock (AJG) fell 9.85%.
But UBS analyst Brian Meredith said in a note that he believed the stock price drop was a “meaningful overreach,” noting that insurance brokers remain “essential intermediaries” in household financial decisions and that AI is unlikely to ultimately transform the industry.
On Tuesday, tech startup Altruist announced new tax planning features in its AI tool, Hazel. This has raised concerns that the specialized customer services provided by securities firms and asset management companies will face increased competition.
Charles Schwab (SCHW) stock fell 7.42% on Tuesday. Shares of financial services companies LPL Financial (LPLA) and Raymond James (RJF) fell 8.75% and 8.31%, respectively.
Real estate services suffered on Wednesday and Thursday.
Cushman & Wakefield stock (CWK) fell 13.8% on Wednesday and 11.5% on Thursday. Shares of real estate services company CBRE Group (CBRE) fell 12.2% and 8.8% in two days. Jones Lang LaSalle (JLL) fell 12.5% and 7.6%.
“We believe investors are scrutinizing high-fee, labor-intensive business models that are seen as potentially vulnerable to disruption by AI,” Keefe, Bruyette & Woods analyst Jade Rahmani said in a note.
AI also has the potential to not only compete with traditional real estate agents and brokers, but also reduce the overall demand for office space. AI executives predict that AI technologies will eliminate parts of the economy.
“As AI reduces the number of office workers over the long term, demand for office space will also decline,” CBRE Group CEO Bob Salentic said during an earnings call Thursday morning. “That’s going to be a long-term trend.”
The Dow Jones Transportation Average, an index of 20 companies in the transportation industry, fell 4% on Thursday, its worst day since April.
The culprit is Algorithm Holdings, which has announced a new tool that can improve and optimize the efficiency of trucking operations.
The reaction was swift, with shares of shipping company RXO (RXO) plummeting 20.45% on Thursday. Shares of logistics company CH Robinson Worldwide (CHRW) fell by 14.54%.
“While awareness of artificial intelligence has influenced recent market activity, CH Robinson has been a leader in AI for more than a decade and believes that AI will continue to enhance our performance and further expand our competitive advantage,” CH Robinson said in a statement.
Algorhym’s announcement was all the more surprising given that it used to specialize in selling karaoke equipment before pivoting into an AI and logistics company.
“It is perhaps indicative of the current state of the market that a $6 million market cap company, until recently focused on karaoke, has wiped out tens of billions of dollars from logistics stocks, adding to the market weakness,” Jim Reid, global head of macro research at Deutsche Bank, said in a note.
Algorithmic stock (RIME) rose about 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 current ripples in the stock market are themselves based on a hypothetical scenario, he said.
Kourkafas said these concerns are not based on any immediate fundamental changes to companies’ revenue streams, but are rather “speculative in nature.”
“While there is certainly potential for disruption across industries in the short term, we know these companies are actively looking at ways to evolve and offer better platforms, products and services as a result,” Kourkafas said.
But BTIG chief market technologist Jonathan Krinsky said in a note Thursday that individual stock moves based on AI nerves are “becoming increasingly extreme.”
“At some point…we begin to worry that the weaknesses will outweigh the strengths and the market as a whole will become vulnerable,” Krinsky wrote.
