[Weekend Money] "Whose Rice Bowl Will AI Take Away?" Wall Street's Hunt for the Next AI Losers

"Whose rice bowl will artificial intelligence (AI) take away next?"

The theme that recently emerged on the New York Stock Exchange in the United States was clear. So-called AI fears have spread beyond software into asset management and insurance. In a single day, the share prices of Charles Schwab and Raymond James Financial plunged by 7-8%. This fully reflected concerns that AI could reshape the structure of the asset management market and erode the market share of traditional financial companies by cutting their fees.

Ahn Soeun, a researcher at KB Securities, highlighted this trend in her report titled "Ongoing Search for AI Losers in the Market," released on the 11th, saying, "The market's attempt to identify stocks that will be hurt by AI will continue." She pointed out that on the New York Stock Exchange on the 10th (local time), financial stocks providing asset management services, such as Charles Schwab (-7.3%) and Raymond James Financial (-8.8%), plunged on AI-related concerns, adding that "the trigger was unlisted tech startup Altruist releasing its AI financial tool on Tuesday."

The functions of the financial tool unveiled by Altruist are simple, but from Wall Street's perspective, they can be quite threatening. Its core is to help financial advisors develop customized strategies for clients and to automatically generate various documents such as pay stubs and account statements. Ahn explained, "The market is worried that as AI changes the structure of the asset management market, it could pressure traditional asset management companies to lower their fees and take away their market share."

The same AI fears were also behind the broad sell-off in insurance stocks on the New York Stock Exchange on the 9th. The reason was an AI tool launched earlier this month by Insurify, an unlisted online insurance shopping platform. This AI tool, which uses ChatGPT, provides a service that compares auto insurance premiums by taking inputs such as customers' credit information, detailed vehicle information, and driving history. This was effectively a signal that core tasks of insurers, from product comparison to explanation and recommendation, could be automated by AI.

The market's attempt to identify potential AI losers is expected to continue. This is because every time a new AI tool appears, investors inevitably ask, "Which industry will it hit?" Ahn noted, "In academia, even before the advent of ChatGPT, research was conducted on which types of jobs, with which characteristics, could be easily replaced by AI," and she linked the AI exposure levels of each occupation found in these studies to the industries in the stock market.

Accordingly, she cited insurance, financial services, software and services, and banks (based on GICS level 2) as industries that are relatively highly exposed to AI. Ahn said, "These are the industries that have seen repeated share price declines due to AI since last week," and pointed out, "Industries with a high share of cognitive (analytical) work are more exposed to AI than those with a high share of physical labor, so overall the service sector is more vulnerable than manufacturing."

She added, "Industries with a standardized nature that perform repetitive work based on codified professional knowledge can be more easily replaced by AI, but as the reasoning capabilities of recent AI models have strengthened, even industries with a more unstructured nature can no longer be considered safe." Taking this into account, other industry groups that could potentially be classified as AI losers include media and entertainment, real estate management and development, commercial and professional services, healthcare equipment and services, and pharmaceuticals and life sciences.

On the other hand, even amid these risks of AI encroachment, there are areas where expectations for AI-related benefits are growing. Physical AI infrastructure businesses, represented by TSMC, are at the center of this.

Ahn noted that TSMC's January sales surged 37% year-on-year, beating its growth guidance, and reported, "The market interprets this as chip demand being stronger than expected from the beginning of the year." She diagnosed, "Unlike industries such as software and finance, which are shaken by the risk of AI encroachment, expectations of AI-related benefits continue in physical AI infrastructure industries such as semiconductors."