In the past week, anxiety over AI has rapidly spread throughout the stock market.
As new AI developments emerged, investors had to quickly choose which stocks to hold and which to sell, beginning last week with software companies, leading to a market cap reduction of $2 trillion—marking the most significant repricing in almost 30 years.
This fear has grown wider in scope.
In an unexpected turn on Thursday, a firm previously known for karaoke machines affected trucking stocks after claiming its AI technology could enhance shipping logistics.
While the market was already aware of AI-related risks, concerns about its potential disruption to various industries are intensifying amid ongoing announcements of new tools and updates.
Major indexes showed volatility on Friday following a lower-than-anticipated inflation report, indicating another week of losses. The tech-focused Nasdaq Composite index is set to close the week down by 1%.
Software Stocks
A major sell-off in software catalyzed the market’s weeklong AI-related anxiety. The sector experienced a $2 trillion decrease in market cap within days, representing the largest drawdown outside of a recession in three decades.
Investor trepidation stemmed from fears that AI could threaten software giants, particularly after Antropic introduced new plugins for its Claude Cowork agent, leading to declines across the sector.
The iShares Expanded Tech-Software Sector ETF has seen a 1% decline this week and a total drop of 20% year-to-date.
Insurance Brokers and Wealth Managers
Next, brokerage and wealth management firms found themselves affected.
Stocks of insurers dropped on Monday. The following day, wealth management firms like LPL Financial, Charles Schwab, and Raymond James experienced significant selling pressure after tech company Altruist launched a new AI tool purported to assist clients with tax planning in just “minutes.”
Investors are concerned that AI advancements could erode profit margins for companies offering similar fiduciary services like wealth and estate planning.
The iShares U.S. Broker-Dealers & Securities Exchanges ETF is down 6% this week.
Real Estate
Real estate companies began to experience sell-offs on Thursday as investors contemplated how AI might disrupt services offered by large firms.
Trucking
Finally, the trucking sector faced declines on Thursday, surprisingly due to a former karaoke machine manufacturer.
Algorhythm Holdings, previously known as Singing Machine, released a white paper highlighting its AI-driven freight-scaling tool, which claims to boost logistics efficiency.
The iShares US Transportation ETF dropped 3% this week, while Algorhythm’s shares surged by over 30%, moving out of penny-stock status to trade around $1.25 on Friday morning.
