For the first time, artificial intelligence has driven a significant rally in the stock market to record levels. Currently, AI is destroying stocks one sector at a time. First, the software was under pressure. The iShares Expanded Technology Software ETF (IGV) has fallen nearly 16% over the past month on concerns that AI will curb demand for software services. Finances took another hit last week after technology platform Altruist announced a new AI-powered tax planning tool. The State Street Financial Select Sector SPDR ETF (XLF) fell 4.8% last week, its worst weekly performance since April. Office real estate stocks then tumbled on Thursday on concerns that AI could lead to higher unemployment and reduce demand for commercial real estate. Finally, as investors believed that AI could curb inefficiencies in freight transportation, the name of trucking and logistics fell, reducing demand for the industry. “(Last) week felt like whack-a-mole,” Tony Pasquariello, global head of hedge fund coverage at Goldman Sachs, wrote. “The big question is, while the market has a strong moat separating ‘rent-seekers’ and companies, where are they hiding?” Fortunately, there are some stocks that investors can rely on to weather the artificial intelligence storm. JPMorgan has compiled a list of “mispriced” stocks most immune to AI disruption. Buy now, pay later Big Affirm has made the list. The stock, which JPMorgan rates as Overweight, has fallen more than 17% this month. Fundamentally, however, “the company is performing as well as ever, as the company continues to record premium growth (over 25%) and solid credit performance, and GAAP operating margins are expanding (albeit from a low base),” analyst Reginald Smith wrote. Another name that has caught our attention is Carvana. Despite falling more than 14% in February, analyst Rajat Gupta believes “CVNA’s vertically integrated infrastructure and moat is at the end of AI disruption.” Other stocks on JPMorgan’s list include Roku, Spotify Technology, and CrowdStrike.
