Last week witnessed a wave of selling across software, real estate, and freight transportation stocks as investors grew anxious that artificial intelligence might disrupt various sectors—and analysts suggest this broad-based decline might not yet have reached its conclusion.
Software shares absorbed the initial shock stemming from AI-driven anxieties. However, these fears quickly extended to insurance firms, brokerage houses, property services—even touching logistics and trucking.
“The market is in a ‘shoot first, ask questions later’ mode, where any name or sector that could potentially be impacted by AI disruption is taking a hit,” noted Mohit Kumar, a strategist at Jefferies, in a memo.
The stock selloff signals a significant shift for investors going forward: AI, which had powered major gains in technology and other equity areas for months, could now potentially drag down certain parts of the market.
Financial Services
Shares of major insurance brokers fell on February 9th after a Madrid-based startup, Tuio, unveiled a new insurance application built on ChatGPT, according to UBS.
This sparked concerns that AI tools might absorb the business models and customer bases of established firms. Professional services and insurance company stocks declined. Marsh (MRSH) stock slipped by 7.5%. Arthur J. Gallagher (AJG) shares dropped by 9.85%.
Nevertheless, Brian Meredith, a UBS analyst, stated in a note that he views the selloff as “significantly oversold,” pointing out that insurance brokers remain “essential intermediaries” for household financial decisions, and it’s unlikely AI will ultimately upend the industry.
On Tuesday, the technology startup Altruist announced a new tax-planning feature for Hazel, the company’s AI tool. This triggered worries that specialized client services provided by brokerage and asset management firms could face intensified competition.
Charles Schwab (SCHW) stock fell by 7.42% on Tuesday. Shares of financial firm LPL Financial (LPLA) and Raymond James (RJF) decreased by 8.75% and 8.31%, respectively.
Real Estate
Real estate services found themselves under pressure on Wednesday and Thursday.
Cushman & Wakefield (CWK) shares plummeted by 13.8% on Wednesday and another 11.5% on Thursday. Shares of property services company CBRE Group (CBRE) dropped by 12.2% and 8.8% over the two days. Jones Lang LaSalle (JLL) fell by 12.5% and 7.6%.
“We believe investors are closely scrutinizing high-commission, labor-intensive business models that are perceived as potentially vulnerable to AI-driven disruption,” stated Jade Rahmani, an analyst at Keefe, Bruyette & Woods, in a memo.
Furthermore, AI holds the potential not only to compete with traditional brokers and agents but also to shrink the demand for office space overall, as AI proponents foresee their technology eliminating substantial parts of the economy.
“If there are fewer office workers in the long run due to AI, then demand for office space will decline,” CBRE Group CEO Bob Sulentic commented during the company’s earnings call on Thursday morning. “This will be a long-term trend.”
The catalyst in this instance was Algorhythm Holdings, which announced the development of a new tool capable of enhancing efficiency and better optimizing freight transportation businesses.
The reaction was swift: shares of RXO (RXO), a freight firm, tumbled by 20.45% on Thursday. Logistics company C.H. Robinson Worldwide (CHRW) saw its stock decline by 14.54%.
“While the perception of artificial intelligence is influencing recent market activity, C.H. Robinson has been a leader in AI for over a decade, and we believe AI will only strengthen our metrics and extend our competitive moat,” C.H. Robinson stated.
Algorhym’s announcement was even more surprising given that the company once specialized in selling karaoke machines before pivoting into an AI and logistics venture.
“It might be indicative of the current market state that a $6 million market capitalization company, which until recently specialized in karaoke, helped wipe out tens of billions from logistics stocks to exacerbate weakness,” commented Jim Reid, Global Head of Thematic Research at Deutsche Bank, in a note.
Algorhythm’s stock (RIME) surged by nearly 30% last week.
Where Do Stocks Head Next?
Angelo Kourkafas, a Senior Global Strategist at Edward Jones, told CNN that the “fear of AI disruption” has been the dominant theme across markets for the past two weeks. However, the tremors currently shaking the stock market are themselves based on hypothetical scenarios, he noted.
Kourkafas observed that the concerns are more “speculative” than based on immediate fundamental shifts in company revenues.
“Yes, there might be near-term concerns about the possibility of disruption across many different industries, but we know these companies are actively exploring ways to advance and offer better platforms, products, and services because of it,” Kourkafas said.
However, Jonathan Krinsky, Chief Market Technician at BTIG, stated in a note on Thursday that the AI-nerve-driven stock movements are “becoming increasingly extreme.”
“At some point… we start to worry that weakness is outweighing strength, and the broad market becomes vulnerable,” Krinsky wrote.
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