00:02Wall Street is suddenly waking up to the fact that AI might impact a larger number of industries
00:08and faster than they had expected. What this story is about is how AI disruption fear is
00:14leading to sell-offs in parts of the market outside technology.
00:25On Wall Street, rising fears about artificial intelligence and specifically where it will
00:30disrupt certain companies are sending shares of those companies tumbling.
00:34Wall Street has done an about-face. Investors were concerned that AI was costing too much
00:41and might lead to a big bubble with untold harms. Now investors are concerned that AI
00:47is going to be so disruptive that it renders countless businesses obsolete.
00:52There's definitely been a spillover starting with concerns about legal services, SaaS companies,
00:58heading into insurance firms, tax preparation services, financial services, each of these in
01:04reaction to incremental AI products. The market sell-off really started in early February when
01:10Anthropic introduced a plug-in to an existing product, one that they did not even really do a
01:16formal announcement for.
01:17So what we saw on February 10th, for example, was shares of wealth management companies sell-off
01:23after Altruist, which is a little-known AI startup, came out with a new tax strategy tool.
01:28Look at the stock slides of companies like Salesforce, Charles Schwab, and Blue Owl.
01:33Investors are concerned that AI might be able to replicate their offerings soon.
01:39The fear for investors right now is that they're going to get caught up in the next
01:43version of this sell-off, and so they're really looking for ways to avoid that.
01:50Let's take a step back. In November of 2022, OpenAI kicked off the AI boom. When ChatGPT launched,
01:57people were mainly using it to spit out clever song lyrics and poems and pithy responses to things. But what
02:03we've seen in the last year or so is that people have been using these to shop for products online,
02:09do more advanced online research, and even build apps from scratch with little expertise. Wall
02:15Street now seems to be waking up to the fact that those same tools can be used across different sectors.
02:21These tools are coming out and they're good. And so what we're seeing is investors really worried
02:26about the parts of the market that are tied to AI risk and looking instead to go more into the
02:31AI winners.
02:32This chart depicts two baskets of US-listed stocks from UBS research analysts. One is AI winners and
02:39one is AI risks. As you can see, there's been a massive divergence as investors look to avoid
02:44companies associated with these risks and flock towards the AI winners. That technology has been
02:49very disruptive in a certain corner of the world, particularly Silicon Valley. But in recent months,
02:55it feels like there's been a mainstreaming of it where we're seeing broader awareness,
03:00right? You can use that same technology in your everyday life or in other sectors, even if you
03:04don't really want to code. We've seen video game stocks get hit after a new Google Gemini launch.
03:10We saw insurers get hit after a startup came out with a new product. And even more recently,
03:15real estate stocks are selling off as investors think that this could be the next place that's going
03:19to get hit. At the moment, Wall Street seems to be whipsawing between two different extremely
03:24opposing views. There are investors who are concerned that tech companies are spending too
03:29much money to build AI services with an uncertain payoff. On the other side, investors are anxious that
03:36AI will be so disruptive that it renders numerous businesses obsolete. I've definitely heard sources say
03:44that they just don't understand how both of these things can be true at once. They don't think that these
03:48knee-jerk reactions would be happening if we weren't near record highs on the S&P.
03:56We don't know what next feature or new product is going to be released that sets off the next
04:00sell-off, so really we're just watching to see what happens next. Unsurprisingly, it's hard to predict
04:06where things go from here. What's clear is that the large AI developers and a long list of AI startups
04:13plan to bring advances to more and more sectors as they try to make money in this technology. So we
04:20should expect that if Wall Street is now worried about how disruptive AI could be, there will be
04:25plenty more moments in the months ahead for them to be concerned.
04:36We'll see you next time.
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