From software to real estate, U.S. sectors under the grip of AI scare trade

Impact of AI on U.S. Market Sectors

By Medha Singh and Sruthi Shankar

Software and Software-Exposed Loans

Feb 13 (Reuters) - Wall Street is in the grip of disruption worries from AI. It first started with investors dumping shares of software companies but soon spread to sectors seen as vulnerable to automation, driving sharp losses in U.S. stocks this week.

Financial Brokerage, Data Analytics & Legal Services

The AI scare trade did not spare even sectors such as private credit, real estate brokers, data analytics, legal services and insurers. 

Real Estate Services

Global tech stocks took the hit after Anthropic unveiled a legal AI plug-in. But soon the investor unease deepened following a flurry of AI model upgrades and fresh releases.

Insurance

"With fear driving market sentiment, investors remain in 'sell first think later' mode, asking 'who is next' and showing no mercy for anything remotely seen as an AI loser," Barclays equity strategist Emmanual Cau said.

Trucking & Logistics

Here's a look at how various sectors were impacted by the selloff:

SOFTWARE AND SOFTWARE-EXPOSED LOANS

The S&P 500 Software & Services index has lost about $2 trillion in value since its peak in October. Half of the losses came in the past two weeks, on concerns that fast-advancing AI tools could upend traditional subscription and enterprise tools.

So far this year, the worst-performing Nasdaq 100 stocks include Atlassian down 47%, Intuit down 40% and Workday, which has lost a third of its value. 

Salesforce tumbled about 30% in 2026, while Adobe is down 25% and CrowdStrike 12%. 

"There's this idea that AI is somehow going to replace built‑out models in the near term - models that have been in place for many years and from which companies have profited strongly," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.

The U.S. software sector's worst drawdown in more than three years also knocked down shares of alternative asset managers on concerns over their exposure to loans and leverage tied to the companies. 

Ares, Blackstone, Blue Owl, Apollo, TPG and KKR slumped between 13% and 24% this year.

About a fifth of the private credit space is exposed to the software sector, according to estimates from BNP Paribas.

FINANCIAL BROKERAGE, DATA ANALYTICS & LEGAL SERVICES

The financial industry, particularly brokerages and data analytics firms, were hammered after wealth management firm Altruist introduced AI-enabled tax planning features, stoking fears of the fast-advancing technology upending their business models. 

Shares of brokers LPL Financial, Raymond James Financial and Charles Schwab fell more than 7% on Tuesday. 

   Index provider S&P Global, which issued a downbeat earnings forecast for 2026, has slumped more than 25% in February and was set for its worst month since 2009. Moody's, Factset Research and MSCI also fell sharply this month.

Nasdaq-listed shares of Thomson Reuters touched a near five-year low last week on concerns about AI hurting its legal services business. 

REAL ESTATE SERVICES

Commercial real estate and investment managers took a blow on Wednesday, which KBW analysts said was due to investors rotating out of high-fee, labor-intensive business models viewed as potentially vulnerable to AI-driven disruption.

CBRE Group and Jones Lang LaSalle sank about 12% each on Wednesday, and Cushman & Wakefield slumped nearly 14%. CoStar Group, owner of Apartments.com and Homes.com, fell 5.9%.

"We view market concerns as overstated due to a combination of fragmented CRE end markets and the noncore nature of real estate activities for many clients," Morningstar analyst Sean Sunlop said, noting that their valuations were "not cheap" despite the selloff.

INSURANCE

Insurance stocks took a sharp hit. Brokers and underwriters across both sides of the Atlantic plunged after online platform Insurify released on Monday an AI‑powered comparison tool on ChatGPT, which allows users to compare car insurance rates.  

The S&P 500 insurance index slumped 3.9% on Monday, its biggest single-day drop since mid-October.

Shares of insurance broker Willis Towers Watson have shed 15% so far this week and were set for its worst week since the pandemic-selloff in March 2020. Aon fell 9% and Arthur J. Gallagher dropped 15% this week.

"Ultimately, we believe brokers will bifurcate. Simpler insurance products like term life, personal auto, and home, could see significant AI disruption over the next five years," Morgan Stanley equity strategist Bob Jian Huang said. 

"Higher-valued brokers will use AI to enhance analysis and improve underwriting, not be displaced by it, in our view."

TRUCKING & LOGISTICS

Traders probably did not see trucking and logistics firms as an AI target, but the sector plunged sharply on Thursday. 

AI-focused logistics firm Algorhythm Holdings, which previously sold karaoke machines, said its SemiCab unit boosted customers' freight volumes by 300% to 400% "without a corresponding increase in operational headcount".

The news triggered a rout in stocks such as Landstar System and C.H. Robinson. The Dow Jones Transportation Average fell 4.4%.

Jefferies analysts, however, said the reaction was disconnected from fundamentals. "Proprietary freight data and physical networks remain durable moats," they said.  

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(Reporting by Medha Singh and Sruthi Shankar in Bengaluru; additional reporting by Avinash P; Editing by Arun Koyyur)