Market anxiety regarding artificial intelligence (AI) has recently extended beyond major US tech companies, resulting in increased volatility within the UK stock market. This wave of nervousness erupted last week when a sell-off in wealth management stocks in the US permeated to prominent financial firms in London. Stocks such as St James’s Place, Quilter, Rathbones, and AJ Bell were notably affected.
The tremors began after tech startup Altruist Corp, led by former Wall Street executives, introduced a groundbreaking AI tool designed to help financial advisors tailor tax strategies for their clients. According to Susannah Streeter, chief investment strategist at Wealth Club, there are significant concerns that this could be just the beginning. “The worry is that fresh efficiencies will be unleashed by AI to disrupt the financial advice and investment industry, thereby reducing the fees advisors can charge,” she stated. The speculation about potential losers across various sectors has been growing.
Financial technology firms were not alone in facing setbacks, as UK-listed price comparison platforms, including Money Group and Future, experienced declines amid fears of AI-driven disruption in the insurance market. The anxiety was heightened by the launch of a service by US company Insurify that enables users to compare car insurance via ChatGPT, alongside reports that Spanish insurer Tuio secured approval to generate quotes on the same platform.
Furthermore, several UK software companies, including Sage and Relx, saw their share prices plummet following the unveiling of an AI-powered legal services tool by the startup Anthropic. However, by Tuesday, some of these stocks began to recover, indicating that investors might be shaking off their immediate concerns regarding AI disruption.
Despite this minor recovery, questions linger regarding which sectors might be next to feel the impact of AI-related volatility. Analysts from Deutsche Bank have utilized their proprietary AI tool, dbLumina, to gauge the likelihood of various sectors facing disruption. Their findings suggest that sectors heavily reliant on data and repetitive tasks are particularly vulnerable. Information technology and software sectors stand out as being at risk due to automation, while finance could be similarly affected by the rising popularity of robo-advisors and the automation of data processing roles.
Other areas flagged for potential disruption include customer services, manufacturing, logistics, media, and entertainment. Matt Britzman, a senior equity analyst at Hargreaves Lansdown, emphasized that the insurance sector is already facing scrutiny, given AI’s potential to challenge traditional pricing, underwriting, and distribution models. However, he cautioned that concerns regarding rapid changes might be overstated due to established insurers’ regulatory advantages, financial stability, and expertise in risk management.
Britzman added that AI is more likely to transform how insurance operates rather than completely replacing established players. Similarly, the report suggests that certain sectors, such as healthcare and education, which demand empathy and human connection, remain insulated from potential disruption. Sectors requiring manual dexterity and strategic leadership are also expected to withstand the impact of AI.
Deutsche Bank analysts Reid and Cox caution that while the report paints a compelling picture of AI’s potential, it may oversimplify the challenges to adoption and the implications of disruption. They agree that AI presents revolutionary prospects but also recognize the limitations that may accompany its integration.
The ongoing discourse surrounding AI disruption is expected to persist. Richard Hunter, head of markets at Interactive Investor, noted that while the internet fundamentally altered lifestyles, it did not eliminate the need for social interaction or in-person experiences. The future of AI’s impact remains unclear, and whether it will complement existing frameworks or replace them entirely will be a pivotal question.
