The stock market just got a look at how disruptive investor concerns over AI could become across multiple industries.
What began as a shake-up in software stocks spread to the wealth management, transportation, and logistics industries last week, raising questions about just how deeply AI could transform not only tech but also high-fee service businesses.
The S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) both ended the week down more than 1% as Financial Services (XLF), Consumer Discretionary (XLY), and tech stocks sold off on AI concerns. The Dow Jones Industrial Average (^DJI) was down 1.2% for the week, while the Nasdaq Composite (^IXIC) dropped 2% and the S&P 500 (^GSPC) slipped 1.4%
“That’s the dark side of AI,” Innovator Capital Management chief investment strategist Tim Urbanowicz told Yahoo Finance. “We need to pay attention to that because I do think there’s going to be other industries that are disrupted, and this is certainly a threat.”
Shares of C.H. Robinson (CHRW) and Universal Logistics (ULH) closed out the week with losses of 11% and 9%, respectively, after a Florida-based company announced a new tool that would scale freight volumes without increasing headcount.
The sell-off echoed a drop in wealth management stocks like Charles Schwab (SCHW) and Raymond James (RJF), which fell 10% and 8%, respectively, for the week, after the launch of an AI-driven tax tool that allows advisers to customize strategies for clients. The tool raised fears that automation could put pressure on the industry’s high advisory fees.
Read more: How to protect your portfolio from an AI bubble
The “AI scare trade” has now spread across multiple industries, with software stocks getting hammered in recent weeks amid fears that AI will take over tasks traditionally handled by enterprise giants like Salesforce (CRM) and ServiceNow (NOW) and disrupt their revenue models.
The Tech-Software Sector ETF (IGV), which also includes heavyweights like Microsoft (MSFT) and Palantir (PLTR), is down 22% year to date.
Many on Wall Street consider the sell-off overdone.
“I don’t necessarily think the bottom is in here,” Urbanowicz said. “Margins are through the roof in this category of stocks. Those haven’t come down yet, and valuations still are pretty elevated.”
That said, Urbanowicz still sees a “very supportive backdrop” for stocks, forecasting the S&P 500 at 7,600 by the end of the year.
Part of that has to do with a supportive regulatory backdrop from the Trump administration, corporate tax incentives from the Big Beautiful Bill Act, and leadership in other sectors, like Energy (XLE), Consumer Staples (XLP), and Materials (XLB), which are all up double-digit percentages year to date, compared to Technology (XLK), down 2.5% during the same period.
