Is the AI apocalypse already here?

Investors are uncertain about the potential effects of artificial intelligence

Much of the financial commentariat has been anticipating the US AI stock bubble to burst since at least last summer.

Rather, a stranger is taking place. Microsoft and Amazon have both experienced significant sell-offs in recent weeks, with both companies down 17% since late January.

However, AI is still developing.

The ramifications of a technologically disrupted world are starting to be carefully considered by investors. Their conclusion: The winners of today could end up being the laggards of tomorrow.

The first casualties of the AI apocalypse were software companies.

One need only look at software economics to comprehend the success of US technology over the last 15 years.

Although creating software can be costly, the marginal cost of shipping additional units is almost nonexistent. Software as a service, or SaaS, is absurdly profitable as a result.

Microsoft boasted 68 percent gross margins last year. Tesco, a grocery store, has a gross margin of roughly 7%.

Entrepreneur Marc Andreessen said that "software is eating the world" in 2011. Software is now in danger of being eaten by AI.

The most recent version of Anthropic's Claude Opus chatbot was released on February 5th.

Because of its exceptional coding skills, it was utilized to build a professional platform that carries out fundamental legal analysis.

The implications are obvious. Why would businesses need to continue paying top dollar to a group of Silicon Valley software engineers to develop their enterprise software if AI tools enable them to do it internally?

There was a significant sell-off that was dubbed the "Saaspocalypse." Since the beginning of October, the value of the SandP North American Technology Software index has decreased by thirty percent.

The most lucrative business model in the world appears to be among the riskiest when debt concerns are added.

London's small group of data-driven businesses was not exempt.

As investors looked for new victims of AI, everything from wealth management to logistics sold off.

However, the larger US market is flat for the year despite the defeat. The first reason is that not all technology is in the doghouse.

Google's vast amount of data is believed to give it an AI advantage.

Hardware vendors like Western Digital and SanDisk are still in great demand.

Second, a few stocks from the old economy are rising.

The expansion of the data center will benefit enterprises in the energy and commodity sectors.

It's possible that industries will benefit more from AI than tech companies.

The healthcare industry is expanding steadily thanks to the tailwind of an aging population. The FTSE, which is notorious for its "dinosaurs," may be poised for a comeback if the rotation trend continues.

But there's a lot of uncertainty. According to Jim Reid of Deutsche Bank, it will be a while before we can clearly identify who will actually benefit and suffer from the disruption caused by AI. That gives investors a lot of leeway to use their imaginations.

A year full of "big sentiment swings" is what we can anticipate. "As with all disruption, opportunities will abound" is something that investors should keep in mind.