(Yahoo! Finance) - For weeks, investors have been increasingly concerned that AI is advancing so rapidly that the business models of some of the S&P 500's (^GSPC) most iconic players could take a major hit.
What began as a software sell-off last month has rapidly spread to other industries, fueled by fears that AI could undermine traditional software pricing models or replace fee-based services such as brokerage and consulting.
"There is a wrecking ball bouncing from one industry to the next, and folks are calling it the AI Scare Trade," Craig Basinger, chief market strategist at Purpose Investments, wrote earlier this month.
That sentiment was punctuated on Monday by a Substack post from Citrini Research, which noted the potential wipeout of middle-class, white-collar jobs as tasks become automated.
"In the near term, right now, for us as investors, we have to deal with soured sentiment on AI," Sevens Report founder Tom Essaye told Yahoo Finance on Tuesday morning.
Here's how the trade unfolded, and which sectors have taken the biggest hits.
Software
The first AI-driven stock market cracks appeared in enterprise software as investors grew concerned that rapidly developing AI tools from Anthropic (ANTH.PVT) could reduce the need for data analytics and research, threatening legacy software's core subscription model.
Salesforce (CRM) stock has fallen 28% year to date, while Adobe (ADBE) dropped 25% over the same period amid fears that AI will erode the creative software maker's pricing power. Human resources and workflow platforms ServiceNow (NOW) has declined 30%.
Meanwhile, Workday (WDAY) fell to a five-year low on Wednesday after its revenue forecast missed expectations and its CEO tried to dispel AI disruption fears.
Wall Street analysts have called the selling overblown. But even after Anthropic announced a wave of software partnerships tied to AI tools, the Tech-Software Sector ETF (IGV) remains down 24% year to date.
The sell-off found fresh legs on Monday when Anthropic released a tool to automate the update of legacy code across finance and government, work that traditionally requires costly consultants.
Investors flagged the advancement as a threat to IBM's (IBM) revenue streams. Shares of the cloud and software giant rebounded on Tuesday after posting the worst daily loss in 25 years.
Cybersecurity firms
Cybersecurity firms have been hit after Anthropic announced a new security tool on Feb. 20, impacting shares of CrowdStrike (CRWD), Zscaler (ZS), and Cloudflare (NET).
On Monday, those names extended the slide as fresh worries over AI disruption spread through the market.
Financial services
Wealth management stocks like Charles Schwab (SCHW) and Raymond James (RJF) plunged this month 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.
Credit rating and data analytics firms have also stumbled. And S&P Global (SPGI) and Moody's (MCO) have faced pressure amid fears that AI-powered analytics platforms could eventually compete with traditional subscription data services.
Additionally, American Express (AXP) sank more than 6% on Monday after Citrini Research hypothesized that AI-related unemployment would rise, gutting the credit card giant's customer base.
Bank stocks JPMorgan (JPM), Citigroup (C), and Morgan Stanley (MS) also fell more than 4% in on session following the gloomy scenario.
On Monday, JPMorgan CEO Jaime Dimon said the nation's biggest bank is more likely to be a winner than a victim of AI.
"In my view, we will be a winner," Dimon said. "We've always had the strategy to use technology to do a better job for our customers. And we're quite good at it."
Real estate services
Earlier this month, investors began selling real estate stocks amid fears that AI tools could streamline property valuations, market research, and leasing and rental matching following Anthropic's release of legal and document-processing plug-ins for its Claude model.
Analysts pointed not only to the threat of high-fee, labor-intensive costs coming down for title searches and legal negotiations, but also to the potential for cratering demand for physical office space due to fewer jobs.
Commercial real estate firms CBRE Group (CBRE), Jones Lang LaSalle (JLL), and Cushman & Wakefield (CWK) have rebounded from their sharp falls earlier this month but are still negative for the year.
Logistics and transportation
Freight brokers and transportation intermediaries, which rely on coordination, routing, and pricing optimization, were also punished this month after a Florida-based company announced a new tool that would scale freight volumes without increasing headcount.
Shares of C.H. Robinson (CHRW) and Universal Logistics (ULH) were able to recover from recent losses.
By Ines Ferré - Senior Business Reporter
