Wall Street Investors are worried about AI disrupting various industries. These AI worries are responsible for a drop in shares of the NASDAQ Composite and the S&P 500 by 2% and 1.4%, respectively.
YahooFinance- The stock market is currently seeing investor concerns about AI disrupting multiple industries.
The shaking of stocks in the software industry due to AI worries spread to the transportation, wealth management, and logistics industries during the last week. These jolts raised serious concerns about how deeply AI would transform not only tech but also high-ticket service businesses.
The NASDAQ Composite and S&P 500 (GSPC) closed the week 1% lower as Consumer Discretionary, Financial Services(XLF), and Tech Stocks sold off due to AI concerns. The Dow Jones Industrial Average also dropped by 1.2% for the week, whereas the NASDAQ Composite(IXIC) fell by 2%, and S& P 500 (GSPC) dropped by 1.4%.
According to the Chief Investment Strategist at Innovator Capital Management, Tim Urbanowicz, informed YahooFinance that this is the dark side of AI, and they should pay attention to it, as other industries will also be disrupted due to this, and this is certainly a threat.
The shares of Universal Logistics (ULH) and C.H Robinson(CHRW) also closed this week with losses of 9% and 11% after a Florida-based company declared a new tool that would scale freight volumes without increasing headcounts.
A wide-ranging sell-off in different sectors was reflected in a decrease in wealth management stocks like Charles Schwab and Raymond James. Charles Schwab was down 10%, and Raymond James was down 8% for the week, as the launch of an AI-based tax tool that allows financial advisers to develop custom strategies for their clients raised concerns about how much automation would negatively affect the high advisory fees currently being charged in this industry.
This current “AI scare trade” has expanded into several other industries as well, with software stocks being hit hard during the last few weeks as a result of fears that AI will take over many of the jobs currently performed by large enterprise companies like Salesforce and ServiceNow.
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In addition, the Technology – Software Sector ETF, which contains some of the largest companies in this sector, like Microsoft and Palantir are down 22% year to date.
Analyst Urbanowicz believes this sell-off has been excessive in nature. “I don’t know that we’ve necessarily seen the bottom yet,” he said, before adding that the margins enjoyed by companies in this category are all quite high and therefore represent a potential downside risk to their currently elevated valuations. He does, however, believe that there exists a strong underlying fundamental basis for stocks overall, predicting that by year’s end, the S&P 500 will reach the 7600 level.
It I also attributed to supportive regulatory backdrop from the Trump administration, corporate tax incentives from the Big Beautiful Bill Act, and leadership across other sectors like Materials(XLB), Consumer Staples(XLP), and Energy(XLE), which are all increased by double digits’ year to date compared to technology(XLK), that fell by 2.5% during the similar period.
The chief investment officer at PNC Asset Management Group, Amanda Agati, recommends considering the previous volatility and broader themes. He further added that it is a short-term glitch and, despite the volatile year, the rally is sustainable.
A USB strategist also recently argued that investors should look beyond the tech as a way to navigate the potential risks and fully utilize the upside AI could bring to other industries.
CIO Americans and global head of equities at UBS Global Wealth Management, Ulrike Hoffmann Burchardi, said in a recent note that he believed that companies integrating AI to improve their operations and evolving their business models would benefit from this strategic move, specifically those in healthcare and financial sectors
