AI panic "infection": New tools scare wealth management stocks, Charles Schwab fell over 9% during trading

The threat of artificial intelligence (AI) to traditional business models is spreading in the stock market, expanding from software companies to more industries. Wealth management stocks have become the latest "victims."

On Tuesday, Eastern Time on the 10th, financial software provider Altruist Corp. launched an AI tool for tax strategy formulation, which can help financial advisors create personalized strategies for clients and generate payrolls, account statements, and other documents. This feature directly targets the core business of traditional wealth management companies.

The tool released by Altruist immediately raised market concerns about the business prospects of traditional wealth management companies. During Tuesday's trading, Charles Schwab (SCHW) fell as much as 9.5%, closing down 7.4%. Raymond James Financial Inc. (RJF) and LPL Financial Holdings Inc. (LPLA) saw intraday declines of over 9% and 11%, respectively, closing down nearly 9% and over 8%. Stifel Financial Corp. (SF) dropped more than 7% during the day, closing down 3.8%.

Neil Sipes, an analyst at Bloomberg Industry Research, stated, "This sell-off seems to be related to market concerns about AI disrupting the financial advisory and wealth management models." Investors may primarily worry about the erosion of efficiency gains due to competition, long-term fee compression, and potential market share shifts.

Sipes pointed out that current investor focus is on the competitive pressure brought by efficiency improvements, as well as the potential long-term fee compression and market share shifts that may result. This concern reflects a market reassessment of AI tools' ability to replace human services.

The day before the plunge in wealth management stocks, insurance brokerage stocks had just experienced a similar setback. Last week, the new tool released by AI startup Anthropic triggered a massive sell-off in software stocks, exposing the market's deep anxiety about AI disrupting traditional industries.

Insurance Brokerage Stocks Hit Hard on Monday

The day before the plunge in wealth management stocks, insurance brokerage stocks had just felt the impact of AI tools. The S&P 500 Insurance Index closed down 3.9% on Monday, marking the largest single-day decline since October 2025.

Willis Towers Watson PLC saw a drop of 12% that day, the largest decline since November 2008. Arthur J Gallagher & Co. fell 9.9%, and Aon PLC dropped 9.3%.

Matthew Palazola, an analyst in the insurance industry at Bloomberg Industry Research, indicated that the sell-off may be related to the new AI tools launched by the private online insurance shopping platform Insurify and Anthropic's new tool. Insurify's application uses ChatGPT to compare auto insurance rates, allowing users to input vehicle information, customer credit records, driving records, and other details to complete the comparison The application went live on February 3.

Palazola pointed out, "These applications may pose a threat to some consulting businesses of insurance brokerage firms, but we believe they are more like efficiency amplifiers rather than existential threats."

Anthropic Triggers Software Stock Sell-off Wave

Concerns about AI applications disrupting multiple industries surged into the stock market last week, triggered by the new tools released by AI startup Anthropic. These tools are designed to automate work tasks across various fields, from legal services and data services to financial research.

Following the announcement, investors sold off large amounts of stock, with companies ranging from Expedia Group Inc. to Salesforce Inc. and the London Stock Exchange Group not escaping the fallout. Before a rebound in stock prices last Friday as bottom-fishing funds entered the market, the widely watched software ETF iShares Expanded Tech-Software Sector ETF (IGV) had cumulatively dropped about 12% over the first four trading days of last week.

Shares of Canada-listed Thomson Reuters plummeted 20% last week, marking the largest weekly decline since the company went public in the 1990s. Financial research firm Morningstar Inc. experienced its worst week since 2009. Software developers HubSpot Inc., Atlassian Corp., and Zscaler Inc. all saw declines exceeding 16%.

Media statistics show that the combined market value of 164 stocks in the software, financial services, and asset management sectors evaporated by $611 billion last week.

Disruption Threat Becomes New Market Reality

Daniel Newman, CEO of Futurum Group, commented last weekend: "The situation is evolving every week, every day. The range of companies potentially affected by AI is expanding daily."

Since the launch of OpenAI's ChatGPT at the end of 2022, the disruptive potential of AI has been a hot topic. However, until last week, market attention was primarily focused on the beneficiaries. With hundreds of billions invested in computing power, investors have been enthusiastic about stocks of chip manufacturers, networking equipment companies, energy suppliers, and material producers, all seen as beneficiaries.

This strategy has yielded substantial returns. Since the end of 2022, indices tracking semiconductor-related stocks have more than doubled, while IGV has risen 61%, and the S&P 500 index has increased by 81%.

However, companies like Anthropic, OpenAI, and Google have rapidly pushed new tools to market, making the long-theoretical disruption seem more imminent. In just the past month, Google has impacted video game stocks with a tool that creates immersive digital worlds through simple images or text prompts. Meanwhile, the work assistant based on Claude coding services released by Anthropic triggered a sharp decline in software stocks KeyBanc software analyst Jackson Ader stated, "If your performance and guidance fall short, it raises the question: what confidence can we have in the entire sector?"

Traditional software manufacturers have been hit particularly hard. Salesforce has dropped 48% from its historical high in December 2024, and ServiceNow has declined 57% since peaking in January 2025.

According to data from Goldman Sachs' main broker, software has seen the highest net selling among all sectors this year. As of February 3, hedge funds' net exposure to software has fallen to less than 3%, a historical low, while this ratio peaked at 18% in 2023.

However, data compiled by Bloomberg Industry Research shows that Wall Street analysts' outlook on profit prospects is actually improving. Analysts expect earnings for S&P 500 software and services constituents to grow by 19% in 2026, up from a forecasted increase of 16% a few months ago.

Michael Mullaney, Global Market Research Director at Boston Partners, stated, "Everyone is assuming that operational metrics will bottom out. I am skeptical about this. Even with disruption, profits and profit margins may ultimately remain strong. If I were a growth fund manager, I would buy on the dips."

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