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U.S. equity markets have seen a broad selloff as investor concerns over artificial intelligence spread beyond software into financial services, real estate, insurance, and logistics. The trigger was the launch of new legal AI tools, followed by rapid AI upgrades that raised fears of automation disrupting established business models. Software stocks led the decline, dragging private credit and alternative asset managers with them. Real estate brokers, insurers, and transport firms also fell as markets reassessed labour-intensive models. Analysts remain divided on whether the impact of AI is being overstated.
Wall Street has been dealing with a sharp reassessment of several U.S. sectors as rapid advances in artificial intelligence have unsettled investors. What began as a selloff in software stocks has widened into areas such as real estate services, insurance, financial brokerage, data analytics, legal services, and even logistics, as markets reacted to the growing possibility of automation reshaping established business models. Advertisement
The trigger for the latest wave of volatility was the launch of a legal AI plug-in by Anthropic, which led to a global decline in software stocks. This nervousness intensified as several AI model upgrades and new product releases followed, pushing investors to question which sectors could be next. According to Barclays equity strategist Emmanuel Cau, fear-driven sentiment has kept investors in a sell-first mode, with little tolerance for businesses perceived as vulnerable to AI disruption.
The pressure has been most visible in software. The S&P 500 Software & Services Index has lost around USD 2 trillion in value since its peak last October, with nearly half of that erosion occurring over the past two weeks. Concerns centre on whether fast-improving AI tools could undermine long-standing subscription-based and enterprise software models. Among the weakest performers this year are Atlassian, Intuit, and Workday, all of which have seen steep declines. Larger names such as Salesforce, Adobe, and CrowdStrike have also posted double-digit losses in 2026. Robert Pavlik of Dakota Wealth noted that markets appear to be assuming AI could quickly replace business models that have generated strong profits for years.
The downturn in software has spilled over into private credit and alternative asset managers, reflecting worries about loan exposure and leverage linked to software firms. Shares of Ares, Blackstone, Blue Owl, Apollo, TPG, and KKR have fallen between 13% and 24% this year. Estimates from BNP Paribas suggest that roughly one-fifth of the private credit market has exposure to software-related borrowers.
Financial brokerages and data analytics companies have also been hit. Investor concerns rose after wealth management platform Altruist introduced AI-enabled tax planning tools, fuelling fears of disruption across advisory and brokerage services. Shares of LPL Financial, Raymond James Financial, and Charles Schwab dropped sharply. Data and index providers such as S&P Global, Moody's, FactSet, and MSCI also declined, with Thomson Reuters touching a multi-year low amid concerns over its legal services arm.
Real estate services were not spared. Commercial real estate brokers and investment managers saw heavy selling as investors rotated away from high-fee, labour-intensive models considered at risk from AI-led efficiency gains. Shares of CBRE Group, Jones Lang LaSalle, and Cushman & Wakefield fell sharply, while CoStar Group also declined. Morningstar analyst Sean Sunlop said market fears appeared overstated, pointing to the fragmented nature of commercial real estate markets and the limited role of brokerage services for many clients.
Insurance stocks across the U.S. and Europe came under pressure after online platform Insurify rolled out an AI-powered comparison tool using ChatGPT. The S&P 500 Insurance Index recorded its steepest one-day drop since mid-October. Brokers including Willis Towers Watson, Aon, and Arthur J. Gallagher posted significant weekly losses. Morgan Stanley strategist Bob Jian Huang said simpler insurance products could face meaningful AI disruption over the next five years, while more complex offerings may see AI used to improve underwriting rather than replace brokers.
Even trucking and logistics stocks were affected, surprising many traders. AI-focused Algorhythm Holdings said its SemiCab unit helped clients lift freight volumes by 300% to 400% without increasing staff, sparking a selloff in firms such as Landstar System and C.H. Robinson. The Dow Jones Transportation Average dropped sharply. Analysts at Jefferies said the reaction appeared disconnected from fundamentals, noting that physical networks and proprietary data remain strong competitive advantages.
Source Reuters
5th Jun, 2025
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