Investors are reacting to growing concerns that artificial intelligence (AI) could disrupt a wide range of business models, well beyond traditional software. The impact of AI on markets has never been greater.
Recent declines in the US market have been concentrated in areas such as software, payments, delivery platforms and certain financial services. Major names in these sectors are under pressure, with software ETFs down and well known payment and delivery companies also sliding.
The move followed a widely circulated blog arguing that “agentic” AI (AI systems that can take actions on behalf of users) could significantly compress white collar employment and reshape how businesses earn revenue.
At the heart of the discussion is a simple question: which companies benefit from AI, and which ones are structurally exposed to it? For years, markets treated AI as a growth tailwind for most technology firms. But with rapid improvements in automation and coding tools, that assumption is being challenged.
Two themes are driving the recent repricing:
1. Pressure on software pricing power
If AI tools can replicate or replace certain workflows quickly and cheaply, the value of some software as a service (SaaS) products may be called into question. Companies that rely on recurring seat based subscriptions could face slower growth if customers require fewer human users or seek cheaper alternatives. Even the threat of internal AI development can push valuations lower.
2. Vulnerability of friction based business models
Payments networks, delivery platforms and certain financial intermediaries make money by navigating inefficiencies in transactions or human decision making. If AI agents optimise these processes automatically, the “fee pools” these companies rely on could shrink over time. This helps explain why the sell off extended far beyond software into payments and alternative asset managers.
Where the market is more confident
Companies tied to AI infrastructure such as semiconductor manufacturers, compute providers, data centre operators, power infrastructure and industrial suppliers saw far less impact. Markets appear confident that demand for the physical and digital backbone of AI will continue growing, even if application layer businesses face headwinds.
What this means for investors
The key takeaway is that AI is no longer just about growth stories or futuristic applications. It is becoming a disruption narrative - one that forces investors to rethink which sectors benefit and which face long term pressure. For long term portfolios, areas such as compute, semiconductors, energy infrastructure and the broader AI data ecosystem may offer more durable exposure than trying to predict which software names survive automation.
In the near term, market sentiment may continue to drive volatility. But over time, earnings revisions and business model resilience (not news headlines) will determine which companies emerge stronger in an AI enabled economy.
