"Investors wobbled last week as they worked through the disruption AI is likely to cause across global industries, with further hiccups potentially bubbling through this week. But the reckoning should have been expected, argued Deutsche Bank in a note to clients this morning, because it is a readjustment of perhaps overly optimistic expectations.Software stocks in particular suffered a wipeout amid mounting concerns that large language models may replace current service offerings."
"For months, my published view has been that nobody truly knows who the long term winners and losers of this extraordinary technology will be. Yet as recently as October, markets were implicitly pricing in a world where almost every tech company would come out a winner. Over recent weeks we've seen a more realistic differentiation emerge within tech-but that repricing is now rippling into the broader economy with surprising speed."
Investors experienced volatility as markets adjusted to AI-driven disruption across global industries, with additional short-term hiccups possible. Software stocks suffered severe declines amid fears that large language models could supplant existing service offerings, erasing roughly $2 trillion in software market capitalization. Legal, IT, consulting, and logistics firms also faced downward pressure. Market pricing moved away from an assumption that nearly all tech companies would benefit, toward differentiation between potential winners and losers. Some strategists view the move as a correction of overly optimistic expectations. Calls to adopt AI were paired with cautions drawn from prior technology transitions.
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