Current status of US earnings calls: Discussion of "AI risks" has doubled, companies must "prove their innocence," and investors "sell first, ask questions later."

Current status of US earnings calls: Discussion of "AI risks" has doubled, companies must "prove their innocence," and investors "sell first, ask questions later."

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Despite strong corporate profit growth, during the current earnings season, management and investors have shifted their focus entirely to another dimension: the threat posed by artificial intelligence (AI).

On February 15, Bloomberg’s analysis of earnings call transcripts showed that the number of times management referenced “AI disruption” on calls nearly doubled compared to the previous quarter. Although this technology has yet to significantly lower profit expectations, investors are unwilling to wait for confirmation and are choosing to directly sell off shares of any company perceived to be at risk.

Last week, commercial real estate giant CBRE Group Inc. reported better-than-expected earnings. However, following its CEO’s remarks on an analyst call that “AI could reduce demand for office space in the long run,” the stock suffered a 20% sell-off over two days.

Roberto Scholtes, Strategic Director at Singular Bank, said: “As usual, the market shoots first and asks questions later.” He remarked, “Investors have decided to shift the burden of proof onto companies, which will continue to be hit until they can definitively prove themselves as winners. So currently, nobody is in a rush to dive into these troubled waters.”

Strong Performance Cannot Defeat AI Panic

Though the AI threat narrative is rampant, from a fundamentals perspective, corporate growth remains robust. Industry research data shows S&P 500 constituent companies’ fourth-quarter earnings grew 12% year-on-year, beating the season’s initial expectations of 8.4%. Over 75% of companies delivered positive surprises, a rate above the historical average.

Nevertheless, market performance has stalled. Since early September, the S&P 500 has oscillated between 6500 and nearly 7000 points. Initially, investors worried about excessive AI spending by big tech firms; now, concerns have shifted to the potential threat of this technology to other companies' profits.

“If It’s Digital, It’s Vulnerable”

Over the past year, global investors have searched for potential AI winners and losers. Media, software, and HR stocks are seen as industries most likely to take a hit, and have already been affected. This year, especially last week, the trend has spread to wider fields—finance, professional services, and even logistics companies have begun to feel the impact.

By contrast, Asia’s benchmark indices hit record highs last week, largely thanks to heavyweight stocks like Taiwan Semiconductor Manufacturing Co. (TSMC) and SK Hynix Inc., which provide “picks and shovels” (hardware infrastructure) for AI.

A basket of stocks affected by AI risks compiled by UBS Group AG plunged 40% to 50% over the past year. In the US, these stocks include Salesforce Inc., Unity Software Inc., and ServiceNow Inc.; in Europe, they include London Stock Exchange Group Plc, WPP Plc, Wolters Kluwer NV, and Capgemini SE.

Jean-Edwin Rhea, fund manager at Sunny Asset Management, said: “The trend is clear: if it's digital, it's vulnerable. From a stock market perspective, the physical world offers more short-term certainty than the digital space.”

Facing pressure, executives last week tried to highlight the benefits AI brings instead of its threats. For example, travel company Expedia Group Inc. discussed how it used AI to build products; UK company RELX Plc, owner of LexisNexis legal and news databases, said it provides tools to help customers extract and analyze information; data company Zillow Group Inc. said its residential real estate market is highly localized, making it difficult for AI to disrupt.

While many Wall Street analysts believe the sell-off has been excessive and some stocks have rebounded this month, market sentiment remains fragile.

Short Sellers Make Big Bets

Despite some views that the market response is excessive, short sellers are keeping an eye on these companies, especially in Europe. Short interest has surged in UBS’s basket of European stocks most at risk from AI disruption.

According to S&P Global Market Intelligence, as a metric of short interest, the average percentage of shares lent out in that basket has jumped from about 2% two years ago to over 5% now. Stocks with loan ratios above 5% include Randstad NV, Ubisoft Entertainment SA, Adecco Group AG, WPP, and Hays Plc. The basket plunged 40% in the past year, while the benchmark Stoxx Europe 600 index rose nearly 12%.

Mark Hiley, founder of stock research firm The Analyst, said: “Short sellers are flocking to this theme because the narrative is powerful. With the speed of change, not only can business models be immediately affected, but future earnings have also become extremely uncertain.”

Big Tech’s Capital Spending Bonanza Continues

Even as investors price in the disruptive effects of AI, the so-called “hyperscalers” show no sign of slowing their big data center buildouts.

According to a team led by Bank of America Corp. strategist Savita Subramanian, the five big tech giants—Amazon, Google, Meta, Microsoft, and Oracle—saw capital expenditure grow 72% in 2025 and expect another 63% surge this year.

Subramanian’s colleague Michael Hartnett wrote that, following last week's “AI wildfire disruption,” the clearest catalyst to cool the sell-off would be one of these hyperscaler companies announcing cuts to capital spending.

Risk Warning and Disclaimer ClauseThe market is risky, and investments should be made cautiously. This article does not constitute personal investment advice, nor does it take into account individual users' particular investment goals, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investments based on this are at your own risk. ```