Mounting concerns over artificial intelligence disruption have transformed equity markets into what Deutsche Bank describes as a “sniper’s alley,” as investors reassess which companies stand to benefit — and which could be left behind.
According to analysts at the bank, investor thinking around AI has shifted away from a once “magical vision of the future” toward a more grounded focus on real-world deployment. That transition has weighed heavily on a broad swath of technology shares.
Over the past quarter, software stocks have fallen by double-digit percentages, pressured by the rollout of increasingly capable AI models that can replicate or replace services offered by existing firms. The downturn has not been confined to software. Selling has rippled across multiple industries as Wall Street grapples with AI’s potential to reshape operations in areas ranging from analytics to supply chains.
The impact is visible in major indexes. Since January 28, the Nasdaq Composite has dropped more than 5%, while the so-called Magnificent Seven mega-cap tech names have collectively fallen over 8%. Former market leaders Microsoft and Amazon have slid 17% and 18%, respectively, amid mounting scrutiny over whether vast hyperscaler investments in AI infrastructure will deliver sufficient returns.
“The markets have suddenly turned into a sniper’s alley as the spotlight turns on sectors that could be disrupted by AI automation, disintermediation and obsolescence,” Deutsche Bank analysts including Adrian Cox and Galina wrote.
In a note to clients, they said a growing divide between likely AI winners and losers is fueling the volatility. Investors, they added, are increasingly distancing themselves from the earlier narrative that AI breakthroughs would lift the entire technology ecosystem.
The analysts pointed out that since the 2022 debut of OpenAI’s ChatGPT, companies supplying hardware and infrastructure for AI systems have outperformed service and software providers “where it is clear that AI will be transformative but unclear whether they will disrupt or be disrupted.”
“In the case of doubt, investors are selling,” they said.
At the same time, traders are attempting to limit exposure as pricing AI-related opportunities in public markets becomes more complex. What was once a largely theoretical discussion about AI’s promise is quickly becoming a near-term operational reality.
“AI models may indeed be becoming commoditized. If that is the case, the true value of AI may rest ultimately in applications that have yet to be invented. That unpredictability gives investors yet another reason to take a break from the frenzy,” the analysts said.