AI gold rush turns into AI panic wave! New Wall Street consensus: Avoid any company that could be disrupted

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Wall Street is experiencing a dramatic shift in investment logic: investors are no longer keen on seeking out AI winners, but are instead scrambling to sell stocks of any company that might be disrupted by AI. This "sell first, ask questions later" panic is spreading from the software industry to financial services, wealth management, insurance brokerage, legal services, and other sectors, triggering a series of sharp sell-offs.

The latest wave of selling occurred on Tuesday, when little-known startup Altruist Corp. launched its tax strategy tool Hazel, causing the stock prices of wealth management companies like Charles Schwab, Raymond James Financial Inc., and LPL Financial Holdings Inc. to tumble more than 7% in a single day. This was the biggest drop since the market crash triggered by the tariff war in April.

The panic started last week, when a new tool from Anthropic triggered a deep correction in the software, financial services, asset management, and legal services sectors. On Monday, the launch of an application by online insurance marketplace Insurify, which uses ChatGPT to compare car insurance rates, dealt a heavy blow to the stock prices of American insurance brokers. Market sentiment has shifted from worrying about an AI bubble to fearing the disruption of entire sectors.

According to Bloomberg's Wednesday report, Gabelli Funds portfolio manager John Belton said: "Any company facing potential disruption risk is being indiscriminately sold off." Graniteshares Advisors CEO Will Rhind 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 the market’s deep anxiety over AI disrupting traditional financial services. The tool helps financial advisors create personalized strategies for clients—a task that usually requires an entire team.

Altruist CEO Jason Wenk said in an interview that even he was surprised at the scale of the market reaction, which wiped out billions of dollars in market value for several investment companies. But he believes this sends a strong signal that his company poses a competitive threat.

"People are starting to realize—the architecture we used to build Hazel can replace any job in wealth management," Wenk said, "normally these jobs require a whole team, but AI can perform them effectively for just $100 a month."

Panic quickly spreads across multiple industries

Worries about AI disruption have troubled the software industry for some time. Starting last week, these anxieties rapidly spread to broader sectors. Anthropic's new tool triggered deep corrections in software, financial services, asset management, and legal services—a turning point in market sentiment.

The insurance brokerage industry quickly became the next victim. On Monday, after Insurify launched its ChatGPT-powered application to compare car insurance rates, American insurance brokers’ stocks took a hit. Investors’ logic is simple: any intermediary service that could be replaced by AI faces a survival threat.

AI companies like OpenAI and Anthropic have already made substantial progress in software engineering, launching products that help developers streamline code writing and debugging, and are expanding into other industries.

Market split: Is the disruption being overhyped?

Despite the panic, some market participants are skeptical about the speed and extent of AI disruption. Gabelli's Belton questioned the huge shift from Wall Street worrying about an AI bubble to fearing AI’s economic upheaval.

"Every industry will have winners and losers," Belton said, "but a rule of thumb is that technological disruption usually takes much longer to materialize than expected." He noted that the banking sector has periodically faced challenges from cryptocurrency, electronic services, and other technologies, but none have ultimately shaken its dominance.

Gerber Kawasaki CEO Ross Gerber believes that anxiety about AI losers affecting certain market sectors over the past week is premature. "We can try to predict what the AI world will look like in five years, but we simply don’t know," he said. "The market is trying to judge, but we are still at the early stage of all this."

High valuations intensify market sensitivity

The current wave of sell-offs also reflects widespread anxiety over the surge in stock prices over the past few years. Fueled by the AI spending boom and the unexpected resilience of the U.S. economy, the stock market has soared and valuations have been pushed up, making investors extremely sensitive to any negative signals.

Graniteshares' Rhind said: "If the market perceives anything remotely negative, stocks will fall 10%—this would never happen in a market that isn’t so highly valued."

Such a highly tense environment means that even products launched by small startups can trigger dramatic volatility in large publicly-listed companies. Investors would rather mistakenly sell than risk being disrupted by AI. This mentality is reshaping Wall Street’s investment strategy.

Risk Warning and DisclaimerThe market involves risk, and investors should be cautious. This article does not constitute personal investment advice and does not consider the unique investment objectives, financial circumstances, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular situation. Investing based on this is at your own risk. ```