AI Upends Industries: Which Sectors Are Next?

The rapid advancement of artificial intelligence tools like ChatGPT and Microsoft Copilot is sparking significant investor concern and market volatility, with tech stocks bearing the brunt of the impact. Companies are increasing AI investments, envisioning a new era of technological change comparable to the industrial revolution.

Industries from finance to law and coding are seen as potentially vulnerable to disruption, with some analysts speculating that AI debates could be affecting even sectors like gaming. Data and software providers are considered to be in the 'eye of the storm,' as AI's ability to process information rapidly could erode profits, though proprietary data might offer some protection.

Wealth management firms, such as Hargreaves Lansdown and St James's Place, are also under scrutiny, as generative AI can replicate services they offer at a lower cost. Consumer portals like Rightmove and Autotrader are adapting to new AI-driven search functionalities, necessitating greater investment in their platforms.

Even the retail sector faces AI-driven changes, with potential for reduced returns through AI-powered sizing accuracy and enhanced customer experiences via virtual stylists. Insurance, particularly car insurance, is also evolving with AI-powered, lower-cost offerings like those from Lemonade, challenging traditional providers.

Conversely, sectors such as utilities, energy, and commodities, which rely on physical assets and regulated monopolies, are seen as largely insulated from AI's disruptive potential. Investors may find safer havens in these areas, as their fundamental needs cannot be automated away.