Should investors be worried about AI disruption?
It was SaaS companies earlier this month. Last week it was wealth managers. Stock markets are experiencing a choppy time amid investor concerns around AI disruption, with different sectors in the eye of the storm.
In reality, it’s likely no industry will be completely immune to AI disruption, as back-office roles are replaced by AI agents scurrying around to perform the tasks of multiple admin workers.
Which sectors could be affected most? Who might be the winners and losers? What might this mean for investors?
Here we provide a brief overview – you should form your own view.
Important: This article is only for experienced investors and reflects the author's views. It is not financial advice nor a personal recommendation to invest. You should form your own view. This article is original Wealth Club content.
AI – likely winners and losers
Companies that are ahead of the curve and integrate tools, services and robotics could see a boost to productivity and profits.
So, in itself, disruption isn’t necessarily damaging to a company’s bottom line.
For the manufacturing sector, for instance, using AI-enabled robots could help cut staff costs on factory floors and increase efficiency. Advances in robotics could also help the construction industry, which has often struggled to find labour.
We have already seen automation starting to be deployed on a mass scale across retail, not just for inventory management but increasingly in customer-facing areas, at tills and ordering points, and AI should accelerate this and help boost retailers’ profits.
Companies with a hybrid human and virtual workforce appear likely to stay more resilient. While restaurants may employ robots to clear plates, a friendly human face at the door, table or bar will probably stay in demand.
The disruption of the disruptors
The companies which are likely to end up on the loser heap are those whose business models could be swept away by large language models. Those that have rested on their laurels, charging large fees for ‘complex’ services which AI can turn into highly efficient simple tasks, may also be hit hard.
It looks like we are set to see a big disruption of the disruptors – the companies which grew out of the dotcom era and upended traditional industries. Price comparison sites, analytics companies and a raft of online consumer-focused services risk seeing their business models upended.
Large language models can send AI agents scurrying off to find the best deals, eliminating the need for consumers to visit a third-party site. We may well see fresh waves of disruption hitting the online travel industry, where users can talk to a chatbot and explore destinations, check availability, and book rooms, tours and restaurants within the same chat.
While online agents are also integrating AI tools into their systems to improve the user experience, once people become attached to their favourite chatbot, it’s likely they’ll use them to shop around instead. Although big players like TripAdvisor have partnered with OpenAI to try to be more resilient in this changing world, it’s unclear how the competition will evolve, so it still looks vulnerable.
Delivery giants could also well be future casualties of disruption. If AI agents can connect customers directly with restaurants, and only the delivery infrastructure is used, it could put pressure on the large fees they charge. This would be appealing to the takeaway sector, which is hit hard by high commissions. In the future, new drone operators could even take care of the delivery business, linking up directly with AI agents and leaving the current players out of the loop.
Companies offering professional services like accountancy or consultancy are also likely to come under significant pressure. Customers know they are using AI to transform their back-office operations, eliminating headcount and costs, and so can demand lower fees per contract.
Healthcare and finance – complex regulations may play in their favour
Healthcare and finance will not be immune to AI disruption, but red tape could slow this down. Both sectors are wrapped in layers of regulation, from strict suitability rules and capital requirements in asset management to clinical safety standards and data privacy laws in healthcare.
This week, shares in asset managers have been hit by a sharp sell-off as fears swirled that AI tools could slash fees and sideline traditional money managers. But running people’s pensions and life savings requires accountability, oversight and human sign-off, not just clever code. In healthcare, AI can assist with diagnostics and administration, but replacing regulated professionals is a far higher hurdle.
The real estate market does look like easy pickings for AI disruptors. The high fees charged by real estate operators are likely to be squeezed if homebuyers can browse locations, check layouts and conduct online visits accompanied by augmented reality agents. While I suspect there will always be demand for a human to open the door and answer questions, it’s likely that the suite of services current estate agents supply could be replaced by superior AI-powered products. Many are already significantly behind the times in adopting AI tools into their offering and risk being left behind as the juggernaut powers on. Firms like Rightmove are likely to stay under pressure as concerns about how the industry will shake out rumble on.
Rates of adoption
There is likely to be a demographic split between enthusiastic adopters of AI chatbots and agents, with younger, more tech-savvy consumers happy to rely on the easy virtual efficiency it offers. Older and wealthier consumers may prefer human-to-human service, especially if they are making high-value purchases. Trust is likely to be highly valued in an age of disruption, which may limit the ability of AI players to wipe out the competition.
Concerns about fraud are set to increase as fraudsters will be able to use even more sophisticated methods to dupe consumers. So, it’s also a reason why human-to-human services are likely to stay in demand, especially for any service requiring large transactions.
Trust is going to be even more valuable in the new AI world. Relationships built up with brands over years will be harder to disrupt. But to be as resilient as possible, companies need to start accelerating AI adoption, otherwise the disruptors will take over.
What might this mean for investors?
Assets such as gold and more defensive stocks – including utilities, healthcare firms, companies selling consumer staples and those with reliable, high‑yielding dividends – tend to be more resilient amid volatility. But as the AI revolution gathers pace, second‑level opportunities across infrastructure and industrial sectors look poised to come into their own.
It is conceivable an investor might try and position their portfolio accordingly – though this could be easier said than done.
Historically, however, it pays off to resist the temptation to be swayed by the daily twists and turns of the market: discipline, diversification and a long-term focus tend to be a better recipe for success, though there are no guarantees.
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Susannah Streeter
Chief Investment Strategist
Susannah joined Wealth Club after five years as Head of Money and Markets at Hargreaves Lansdown. Previously, Susannah was a senior correspondent and financial news presenter at the BBC’s Economics and Business Unit, anchoring programmes on global stock markets and economic developments. She holds a first class degree from Aston University in French with Society and Government.