For stock market, AI turns from lifting all boats to sinking ships

• The S&P 500 software and services index dropped 15% since end of January 2026, with its forward P/E ratio falling to 22.7x, the lowest in nearly three years, following AI disruption concerns from products like Anthropic's Claude Cowork agent
• Wealth management and insurance stocks tumbled sharply on specific AI announcements: LPL Financial, Raymond James, and Charles Schwab each fell at least 7% after Altruist launched AI tax planning, while insurers dropped following Insurify's ChatGPT-powered comparison tool
• Microsoft and Amazon shares are down 16% year-to-date amid concerns over insufficient returns on massive AI capital expenditures, though some strategists see buying opportunities as valuations become more attractive

Market Summary: AI Investment Shift Creates Winners and Losers

Key Development:

The artificial intelligence boom that propelled the U.S. stock market is now creating significant volatility, as investors reassess which companies will benefit from AI versus those threatened by disruption. The market has shifted from a "monolithic AI trade" to selective punishment of perceived losers.

Major Market Impact:

• S&P 500 software and services index down 15% since end of January 2026
• Microsoft and Amazon both down 16% year-to-date amid concerns over insufficient AI capital spending returns
• Software sector's forward P/E ratio fell to 22.7x, lowest in nearly three years
• S&P 500 constituents declining this year are down average 10.6% versus 5.9% at same point in 2025

Affected Sectors:

Software: Stocks tumbled following Anthropic's Claude Cowork agent launch with new plug-ins

Wealth Management: LPL Financial, Raymond James, and Charles Schwab each dropped at least 7% after startup Altruist introduced AI-enabled tax planning

Insurance Brokers: Willis Towers Watson and Arthur J Gallagher fell following Insurify's ChatGPT-powered comparison tool

Market Context:

Despite tech weakness, the S&P 500 remains up over 1% in 2026 and near record highs, with other sectors compensating. S&P 500 earnings projected to rise 14% this year with Fed expected to cut rates further.

Investor Outlook:

JPMorgan strategists see buying opportunities in "AI-resilient" software companies. Analysts emphasize that economic "moats" and competitive advantages will help identify quality investments amid indiscriminate selling, though rapid AI developments make it challenging for companies to counter negative narratives.