How Are Investors Dealing With AI Fears These Days? ‘Sell First, Ask Questions Later'

• Financial sector stocks like Charles Schwab and LPL Financial dropped this week after Anthropic launched an AI model for financial analysis and Altruist introduced an AI tax planning tool; SPDR Software & Services ETF is down 19% year-to-date
• Analysts characterize the reaction as 'sell first, ask questions later,' with Morgan Stanley and Deutsche Bank identifying mispriced stocks including Microsoft, Intuit, Palo Alto Networks, and Spotify as potential opportunities
• Equity strategists warn that 'disruption-related volatility' will likely be recurring, though some believe meaningful AI disruption will play out over a much longer timeline than investors currently anticipate

Market Summary: AI Disruption Fears Drive Sector Selloffs

Key Developments

Investors are aggressively selling stocks perceived as vulnerable to AI disruption, with a "sell first, ask questions later" mentality dominating markets. The financial sector became the latest casualty this week following announcements from Anthropic unveiling an AI model for financial analysis and Altruist launching AI-powered tax planning tools.

Market Impact

Financial stocks including Charles Schwab and LPL Financial faced significant pressure. The SPDR S&P Software & Services ETF (XLK) has declined 19% year-to-date, while the Financial Select Sector SPDR ETF (XLF) dropped 3%, contrasting with positive benchmark index performance. This AI-related volatility is interrupting rallies in the S&P 500 and Nasdaq.

Quantifiable AI Adoption

Morgan Stanley reports that 30% of tracked companies cited measurable AI adoption impacts in Q4, up from 16% in the same 2024 period, making disruption concerns more tangible and quantifiable for investors.

Analyst Perspectives

Multiple analysts suggest markets have overreacted, creating "mispriced" opportunities. Morgan Stanley and Deutsche Bank identify potentially undervalued stocks including Microsoft, Intuit, Palo Alto Networks, Sony Group, Tencent Holdings, and Spotify.

Deutsche Bank's Brad Zelnick argues that meaningful AI disruption will unfold over a "much longer timeline than investors anticipate." Yardeni Research maintains an "overweight" recommendation on financial stocks, viewing recent declines as excessive panic.

Outlook

Equity strategists warn that "disruption-related volatility" will likely be recurring, creating ongoing market turbulence as investors grapple with AI's evolving impact across sectors.