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

By Medha Singh and Sruthi Shankar

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.

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

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.

"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.

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 .SPLRCIS 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 TEAM.O down 47%, Intuit INTU.O down 40% and Workday WDAY.O, which has lost a third of its value.

Salesforce CRM.O tumbled about 30% in 2026, while Adobe ADBE.O is down 25% and CrowdStrike CRWD.O 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 ARES.N, Blackstone BX.N, Blue Owl OWL.N, Apollo APO.N, TPG TPG.O and KKR KKR.N 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 LPLA.O, Raymond James Financial RJF.N and Charles Schwab SCHW.N fell more than 7% on Tuesday.

Index provider S&P Global SPGI.N, 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 MCO.N, Factset Research FDS.N and MSCI MSCI.N also fell sharply this month.

Nasdaq-listed shares of Thomson Reuters TRI.O 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 CBRE.N and Jones Lang LaSalle JLL.N sank about 12% each on Wednesday, and Cushman & Wakefield CWK.N slumped nearly 14%. CoStar Group CSGP.O, 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 .SPXIN slumped 3.9% on Monday, its biggest single-day drop since mid-October.

Shares of insurance broker Willis Towers Watson WTW.O have shed 15% so far this week and were set for its worst week since the pandemic-selloff in March 2020. Aon AON.N fell 9% and Arthur J. Gallagher AJG.N 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 RIME.O, 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 LSTR.O and C.H. Robinson CHRW.O. The Dow Jones Transportation Average .DJT 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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