5 sectors that have been shaken by the AI-driven 'scare trade' shaping markets this year

AI Fears Shake Up Major Sectors

In recent weeks, growing anxiety over the rapid progress of artificial intelligence has unsettled investors, raising concerns that the business models of some of the S&P 500’s most well-known companies could face significant challenges.

What started as a downturn in software stocks last month quickly spread to other industries. Worries have mounted that AI could disrupt traditional software pricing or even replace fee-based services like consulting and brokerage.

Craig Basinger, chief market strategist at Purpose Investments, described the situation as a “wrecking ball” moving from one sector to another, dubbing it the “AI Scare Trade.” This sentiment was echoed in a recent Substack post by Citrini Research, which highlighted the risk of widespread automation threatening middle-class, white-collar jobs.

“Right now, as investors, we’re facing negative sentiment around AI,” said Tom Essaye, founder of Sevens Report, in a conversation with Yahoo Finance.

Which Sectors Have Been Hit Hardest?

Software

The first signs of AI-driven market turmoil appeared in enterprise software, as investors worried that new AI tools from Anthropic might reduce the need for traditional data analytics and research, threatening the core subscription models of legacy software companies.

Salesforce shares have dropped nearly 30% this year, while Adobe has fallen 25% amid concerns that AI could undermine its pricing power. ServiceNow, a leader in HR and workflow software, is also down 30%.

Workday hit a five-year low after its revenue outlook disappointed investors, despite efforts by its CEO to calm fears about AI disruption.

Some Wall Street analysts believe the sell-off is exaggerated. Even after Anthropic announced new AI-powered software partnerships, the Tech-Software Sector ETF remains down 26% for the year.

The sell-off intensified when Anthropic launched a tool to automate updates of legacy code in finance and government—tasks that typically require expensive consultants. This development was seen as a threat to IBM’s revenue, though IBM shares rebounded after a historic single-day loss.

Cybersecurity

Cybersecurity companies have also come under pressure after Anthropic introduced a new security tool in February. This affected stocks such as CrowdStrike, Zscaler, and Cloudflare.

These stocks continued to slide as fresh concerns about AI’s disruptive potential spread throughout the market.

Financial Services

Wealth management firms like Charles Schwab and Raymond James saw their shares tumble after the introduction of an AI-powered tax tool that enables advisers to tailor strategies for clients. This innovation sparked fears that automation could erode the industry’s high advisory fees.

Credit rating and data analytics companies, including S&P Global and Moody’s, have also faced pressure as AI-driven analytics platforms threaten to compete with traditional subscription services.

American Express fell over 6% after Citrini Research suggested that AI-related job losses could shrink its customer base. Major banks like JPMorgan, Citigroup, and Morgan Stanley also declined more than 4% in response to these concerns.

Despite the uncertainty, JPMorgan CEO Jamie Dimon expressed confidence, stating, “We will be a winner. We’ve always used technology to better serve our customers, and we excel at it.”

Real Estate Services

Earlier this month, real estate stocks came under pressure as investors worried that AI tools could streamline property valuations, market research, and leasing processes. This followed Anthropic’s release of legal and document-processing plug-ins for its Claude model.

Analysts noted that AI could reduce labor-intensive costs for title searches and legal negotiations, and potentially decrease demand for office space as automation reduces the workforce. Commercial real estate firms like CBRE Group, Jones Lang LaSalle, and Cushman & Wakefield have recovered somewhat but remain down for the year.

Logistics and Transportation

Freight brokers and logistics companies, which depend on coordination and pricing optimization, were also affected after a Florida-based firm unveiled a tool to increase freight volumes without adding staff. Shares of C.H. Robinson and Universal Logistics have since rebounded from their lows.

The AI-driven market shakeup has extended far beyond software, as investors question whether established business models across multiple industries can withstand the pace of technological change. (AP Photo/Richard Drew)