Investors are no longer keen on identifying AI winners but are rushing to sell stocks of any company that could potentially be disrupted by AI. This 'sell first, ask questions later' panic is spreading from the software industry to multiple sectors including financial services, wealth management, insurance brokerage, and legal services. The mindset of preferring to err on the side of caution rather than risk being disrupted by AI is reshaping investment strategies on Wall Street.
Wall Street is undergoing a dramatic shift in investment logic: investors are no longer keen on identifying AI winners but are instead rushing to sell stocks of any companies that could potentially be disrupted by AI. This 'sell first, ask questions later' panic is spreading from the software industry to multiple sectors, including financial services, wealth management, insurance brokerage, and legal services, triggering a series of sharp sell-offs.
The latest wave of sell-offs occurred on Tuesday when a little-known startup, Altruist Corp., launched its tax strategy tool Hazel, causing$Charles Schwab (SCHW.US)$、$Raymond James Financial (RJF.US)$and$LPL Financial (LPLA.US)$wealth management firms such as Charles Schwab to experience a single-day stock price plunge of over 7%, marking the largest decline for these stocks since the market crash triggered by the April tariff war.
This panic began last week when a new tool introduced by Anthropic triggered a deep correction across the software, financial services, asset management, and legal services sectors. On Monday, after the online insurance marketplace Insurify launched a new application using ChatGPT to compare auto insurance rates, shares of U.S. insurance brokers suffered heavy losses. Market sentiment has shifted from concerns about an AI bubble to fears of entire economic sectors being disrupted.
According to a Bloomberg report on Wednesday, John Belton, a fund manager at Gabelli Funds, stated: "Any company with potential disruption risks is being indiscriminately sold off." Will Rhind, CEO of Graniteshares Advisors, admitted: "I don’t know who will be next."
Wealth management becomes the latest hard-hit sector.
The sell-off triggered by Altruist’s AI tool Hazel highlights deep market anxiety over AI disrupting traditional financial services. The tool can assist financial advisors in customizing personalized strategies for clients—a task typically requiring an entire team to complete.
Jason Wenk, CEO of Altruist, expressed surprise at the scale of the stock market reaction during an interview, noting that this sell-off wiped out billions of dollars in market value from several investment firms. However, he believes it sends a strong signal that his company poses a competitive threat.
"People are beginning to realize—the architecture we used to build Hazel can replace any job in the wealth management field," Wenk said. "These tasks usually require an entire team to complete, whereas AI can effectively handle them for just $100 per month."
Panic spreads rapidly across multiple industries.
Concerns about AI disruption have troubled the software industry for some time. But starting last week, this anxiety quickly spread to broader fields. A new tool introduced by Anthropic triggered a deep correction across the software, financial services, asset management, and legal services sectors, marking a turning point in market sentiment.
The insurance brokerage industry quickly became the next victim. On Monday, following the launch of a new application by online insurance marketplace Insurify that uses ChatGPT to compare auto insurance rates, shares of U.S. insurance brokers suffered significant losses. The logic of investors is straightforward: any intermediary service that could potentially be replaced by AI faces an existential threat.
AI companies such as OpenAI and Anthropic have already made substantial progress in the field of software engineering, introducing products that assist developers in simplifying the processes of coding and debugging, and are now expanding into other industries.
Market Divide: Is Disruption Overhyped?
Despite the widespread panic, some market participants remain skeptical about the speed and scope of AI disruption. Belton of Gabelli questioned the dramatic shift on Wall Street from concerns about an AI bubble to fears of AI disrupting the economy.
"Every industry will have winners and losers," said Belton. "However, one rule of thumb is that technological disruption often takes longer to materialize than expected." He pointed out that the banking sector has periodically faced challenges from cryptocurrencies, electronic services, and other technologies, but these ultimately failed to undermine its dominance.
Ross Gerber, CEO of Gerber Kawasaki, believes the anxiety over AI losers that troubled parts of the market last week is premature. "We can try to predict what the AI world will look like five years from now, but we simply don't know," he said. "The market is attempting to make judgments, but we are still in the early stages of all this."
Elevated Valuations Amplify Market Sensitivity
The current sell-off also reflects widespread market anxiety over stock price gains in recent years. Driven by a surge in AI-related spending and unexpected resilience in the U.S. economy, the stock market has soared, pushing valuations higher and making investors extremely sensitive to any negative signals.
Rhind of Graniteshares stated, "If the market detects even slightly negative information, stocks drop by 10%, a situation that would never occur in a market with less elevated valuations."
This highly tense market environment means that even product launches by small startups can trigger significant volatility among large listed companies. Investors prefer to err on the side of caution rather than risk being disrupted by AI, a mindset that is reshaping investment strategies on Wall Street.
Editor/Melody
