🤖 AI Fear Hits Wall Street: From Software to Trucking, the Sell-Off Spreads Beyond Tech

Artificial intelligence was supposed to be the market’s biggest growth engine. Last week, it briefly became its biggest source of anxiety.

What began as a technology-sector pullback quickly rippled into wealth management, transportation, and logistics stocks—an unusual chain reaction that left investors questioning whether AI’s disruptive force could compress profits across industries long considered insulated from automation.

Major U.S. indexes slid modestly for the week, but beneath the surface the damage was more telling: financial services, consumer-facing businesses, and software companies all faced selling pressure tied to what traders began calling the “AI scare trade.”

“This is the dark side of AI,” said Tim Urbanowicz, chief investment strategist at Innovator Capital Management.
“We need to pay attention because other industries will be disrupted—and this is certainly a threat.”

The sell-off accelerated after a Florida-based firm unveiled a new AI-powered logistics tool capable of scaling freight volumes without adding staff—a development investors interpreted as a warning shot for labor-heavy supply chain companies.

The declines highlighted a growing realization: AI isn’t just about writing code or generating content—it may fundamentally reshape how physical goods move around the world.

The tremors didn’t stop with freight.

Shares of advisory firms such as Charles Schwab and Raymond James fell sharply after the debut of an AI-driven tax optimization platform capable of customizing strategies once handled by high-fee human advisers.

The fear? Automation could compress margins in one of Wall Street’s most lucrative service businesses.

The anxiety echoed an earlier wave of selling in enterprise software, where investors are reassessing how generative AI might erode traditional subscription models dominated by companies like Salesforce and ServiceNow.

Even diversified tech leaders such as Microsoft and Palantir, often seen as AI beneficiaries, have been caught in the broader valuation reset as investors rethink how profits will be distributed in an AI-first economy.

A key software-sector ETF is now down more than 20% this year, underscoring how dramatically sentiment has shifted.

Not everyone believes the AI-driven sell-off signals long-term trouble.

Urbanowicz argues valuations remain elevated and margins unusually high, suggesting the repricing may be part of a broader adjustment rather than a collapse.

He still expects a supportive backdrop for equities overall, citing regulatory tailwinds, tax incentives, and strength in sectors like energy, materials, and consumer staples—areas less directly exposed to AI disruption.

At PNC Asset Management Group, chief investment officer Amanda Agati called the volatility a “short-term blip,” pointing to healthy market breadth outside the pressured names.

Meanwhile, strategists at UBS say investors should widen their lens rather than abandon the theme altogether.

Companies that use AI effectively, rather than compete against it, may emerge as the real winners—especially in financials and healthcare, according to Ulrike Hoffmann-Burchardi, the firm’s CIO for the Americas.

The latest market reaction signals a transition in how Wall Street views artificial intelligence.

For the past two years, AI has largely been treated as a growth narrative. Now, investors are confronting its second-order effects:

That shift from excitement to evaluation may define the next phase of the AI trade.

Despite last week’s declines, many strategists still expect equities to finish the year higher—albeit with more volatility as AI’s economic consequences become clearer.

In other words, the market is no longer just betting on AI innovation.

It’s beginning to price in who gets disrupted by it next.