Why the AI ‘Scare Trade’ Keeps Spooking Markets

Over the past three years, investors have sought exposure to all things artificial intelligence, including high-flying tech stocks behind some of the leading AI technology. Recently, though, the market’s focus has shifted, as predictions that AI will be so successful that it might supplant the need for many types of businesses and workers has driven some stocks down sharply. Wall Street is calling it the “AI scare trade.”

The moniker first popped up among market participants unnerved by rolling selloffs in industries such as trucking that previously hadn’t been considered related to AI. The term then started making its way into Wall Street’s lexicon in early February, said Jade Rahmani, an analyst with Keefe Bruyette & Woods Inc., who was among the first to publish a research note describing the AI scare trade.