Wall Street weighs recent stock sell-off over disruption fears
The stock market has seen how disruptive investor concerns about AI could be across multiple sectors.
The shakeup in software stocks last week spread across the asset management, transportation and logistics sectors, raising questions about how profoundly AI could transform not just technology but also high-paying service businesses.
The S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) finished the week down more than 1%, as Financial Services (XLF), Consumer Discretionary (XLY) and technology stocks sold off on AI concerns. The Dow Jones Industrial Average (^DJI) fell 1.2% for the week, while the Nasdaq Composite (^IXIC) fell 2% and the S&P 500 (^GSPC) fell 1.4%.
“This is the dark side of AI,” Tim Urbanowicz, chief investment strategist at Innovator Capital Management, told Yahoo Finance. “We need to be careful about that because I think other industries will be disrupted and that’s definitely a threat.”
Following a Florida-based company, shares of CH Robinson (CHRW) and Universal Logistics (ULH) closed the week down 11% and 9%, respectively. announced A new tool to scale freight volumes without increasing the number of employees.
The selloff reflected a decline in asset management stocks such as Charles Schwab (SCHW) and Raymond James (RJF), which fell 10% and 8%, respectively, for the week following the launch of an AI-driven tax tool that allows advisors to customize strategies for clients. The tool has raised fears that automation could put pressure on the industry’s high consultancy fees.
Read more: How do you protect your portfolio from the AI bubble?
“AI fear trading” has now spread across multiple industries, with software stocks taking a hit in recent weeks amid fears that AI will take over tasks traditionally undertaken by enterprise giants like Salesforce (CRM) and ServiceNow (NOW) and disrupt revenue models.
The Technology-Software Sector ETF (IGV), which includes heavyweights like Microsoft (MSFT) and Palantir (PLTR), is down 22% year to date.
Many on Wall Street think the sell-off has been exaggerated.
“I don’t think the bottom is here,” Urbanowicz said. “Margins are through the roof in this stock category. They haven’t fallen yet and valuations are still quite high.”
However, Urbanowicz still sees a “very supportive backdrop” for stocks and predicts the S&P 500 will be at 7,600 by the end of the year.
Part of this has to do with the Trump administration’s supportive regulatory infrastructure, corporate tax incentives from the Big Beautiful Bill Act, and leadership in other sectors such as Energy (XLE), Consumer Staples (XLP), and Materials (XLB), which are up double-digit percentages year over year compared to Technology (XLK) and are down 2.5% over the same period.
