Market nervousness around artificial intelligence (AI) have recently spread beyond the big US tech names, sparking volatility among certain companies on the UK market.
Last week, a sell-off in wealth management stocks rippled over from the US market to leading London-listed financial names. St James’s Place (STJ.L), Quilter (QLT.L), Rathbones (RAT.L) and AJ Bell (AJB.L) were among the names caught up in the sell-off.
The stocks fell after tech startup Altruist Corp, which is led by former Wall Street professionals, unveiled a new AI tool which is aimed at enabling financial advisers to personalise tax strategies for clients.
Commenting at the time, Wealth Club chief investment strategist Susannah Streeter said: “The worry is that this is just the tip of the iceberg and fresh efficiencies will be unleashed by AI to disrupt the financial advice and investment industry and reduce the fees which can be charged.
Read more: UK unemployment reaches five-year high and wage growth continues to slow
“As the AI cards are shuffled, the pile of potential losers is mounting up, and speculation about which sector will be hit next is rife.”
UK-listed price comparison sites MoneySuperMarket-owner Mony Group (MONY.L) and Go.Compare-owner Future (FUTR.L) also came under pressure from concerns around AI-upheaval in the insurance sector. US firm Insurify launched a service where users can compare car insurance through ChatGPT, while Spanish insurer Tuio has reportedly got approval to provide quotes inside ChatGPT.
Meanwhile, UK-listed software companies, including Sage (SGE.L) and Relx (REL.L) saw their share prices drop recently, after startup Anthropic launched an AI-powered legal services tool.
A number of these stocks staged a recovery on Tuesday, suggesting investors had shook off their immediate AI-disruption concerns.
Despite this rebound, the question still remains as to which sectors could next fall prey to AI-related jitters.
Deutsche Bank (DBK.DE) global head of macro and thematic research Jim Reid and research analyst Adrian Cox said in a note published on Monday that they asked the investment bank’s proprietary AI tool dbLumina which sectors are most and least likely to be disrupted by the technology.
Their AI-generated report said that data-rich sectors with repetitive, pattern-based tasks are most likely to be disrupted. Reid and Cox said that the report “singles out information technology and software for disruption, thanks to automation of core tasks and disintermediation”.
They said that other areas flagged as “ripe for disruption include finance, thanks to the rise of robo-advisers and automation of back-office roles like data processing”.
Customer services, manufacturing and logistics, as well as media and entertainment were other sectors highlighted in the AI-generated report.
Read more: Stocks that are trending today
Looking specifically at the FTSE 100 (^FTSE), Matt Britzman, senior equity analyst at Hargreaves Lansdown, said that the insurance sector “is also facing pressure as AI raises questions about the durability of traditional pricing, underwriting, and distribution models”.
“However, fears of rapid change seem overstated, given insurers’ regulatory moats, balance-sheet strength, and deep expertise in risk selection and claims management,” he said. “Incumbents are also well placed to deploy AI not just for offence but also for defence, using it to drive material cost efficiencies and improve pricing discipline across their businesses.”
“As a result, AI is more likely to reshape how insurance is distributed and operated than to eliminate the role of established players altogether — we also see a similar future for some of the high-quality names caught up in the more dramatic software sector selloff,” Britzman added.
Deutsche Bank’s AI-generated report said that the sectors most insulated from disruption require “require empathy and human connection, like direct patient care and education”.
It also highlighted the sectors “requiring manual dexterity in unpredictable environments such as construction and skilled trades” as well as those “demanding strategic and creative leadership”.
Reid and Cox said that they “broadly agree with the conclusions, which are a faithful reflection of the current consensus”.
At the same time, they said that they “would place more weight on the near-term obstacles to adoption than the report suggests”.
“We also think the report goes too far in equating disruption with inherently negative outcomes,” they said.
Read more: Stocks to watch this week: Walmart, Analog Devices, BAE Systems and Rio Tinto
In addition, Reid and Cox flagged that the report also cited headline figures that “read as authoritative but may be drawn from a small number of widely referenced studies”.
Even so, the analysts said that report is a “strong starting point, proving its own argument: AI is useful, potentially revolutionary, and here to stay”.
Richard Hunter, head of markets at Interactive Investor, said that the debate over AI disruption will “continue for some time”.
“The internet was seen as being seismic in changing the world, which of course it was, but not at the expense of the swath of industries which were to be affected given that people could now live, shop and eat without leaving the house,” he said.
“Instead, it could not replace social interaction and became a complementary tool to lifestyles rather than a replacement. It remains to be seen whether AI will pursue the same route.”
Read more:
Download the Yahoo Finance app, available for Apple and Android.
