How AI Is Changing Markets

Fifteen years ago, a technology investor named Marc Andreessen said that "software is eating the world." He meant that computer programs would eventually replace many manual tasks and services. This prediction came true as online services and digital platforms changed how we shop, work, and live. Understanding this helps explain why stock markets have been up and down lately.

Now, artificial intelligence (AI) is the next big change in technology. Markets are trying to figure out which companies will benefit and which might struggle. Looking at how past technology changes played out can help investors stay calm during uncertain times.

New technology creates both winners and losers. Recently, technology stocks dropped sharply but then quickly recovered. A major AI company called Anthropic released new tools that can do tasks that used to require specialized software. This made investors worry about older software companies. Some large technology companies also spent over $100 billion on AI equipment in just three months, making people wonder if this spending makes sense.

Interestingly, this happened almost exactly one year after a Chinese AI company called DeepSeek claimed it could build AI systems much more cheaply. Both times, markets reacted strongly but then settled down. This shows why it's important to stay focused on long-term goals rather than short-term market swings.

Technology changes follow similar patterns throughout history

The uncertainty around AI might seem new, but past technology changes followed similar patterns. Think about how software has changed over the years. It started as something you bought in a box and installed on one computer. Now it's on our phones and powers almost everything we do - from banking to shopping to entertainment. Each time, markets had to figure out which companies would succeed and which would struggle.

AI might change how many services are created and delivered. But even the most powerful technology doesn't eliminate the need for expertise and quality service. AI systems will still need good data, reliable platforms, and specialized knowledge. People will still want products and services they can trust.

It's also important to be realistic about how fast things will change. While AI companies have predicted major breakthroughs for years, recent signs suggest progress may be slowing somewhat. Even so, what AI can do today is already impressive and is clearly changing how investors think about the future.

The job market adds to concerns

The job market has also gotten weaker since mid-2025, which worries investors. Government data showed that job openings fell to their lowest level since 2020 in December. There used to be more than two job openings for every person looking for work. Now there are fewer openings than job seekers. Another report showed that companies cut 108,435 jobs in January, the most for that month since 2009.

We don't know yet if AI is causing these job cuts. History shows that major technology changes eventually create more jobs than they eliminate, but the transition period can be difficult. In the long run, other economic data look healthy. People are still spending money, and inflation (the rate at which prices rise) has stayed below 3%. So while there are concerns, the economy could keep growing at a good pace.

What this means for your investments

For investors, recent ups and downs show why having a balanced mix of investments matters more than any single trend. Technology and communication stocks have delivered strong returns recently but can also swing up and down as expectations change. While groups like the Magnificent 7 tech companies have done well over the past several years, they struggled in 2022 and have had a tough two months recently.

An important question is whether stocks are too expensive. The S&P 500's price-to-earnings ratio (a measure of how expensive stocks are) is near historically high levels. Some investors are buying stocks in other sectors like consumer goods, energy, and manufacturing instead. This suggests markets are looking beyond just AI for opportunities.

Cryptocurrencies like Bitcoin have also dropped sharply, falling 50% to just above $60,000 before recovering somewhat. This reminds us that cryptocurrencies can be very volatile (they go up and down a lot). For those interested in these assets, deciding how they fit into a balanced investment mix is more important than trying to time the market.

Ultimately, AI trends should be viewed alongside other market and economic changes. Based on past cycles, markets will likely overreact to these trends in the short run. History shows that patient investors with well-balanced portfolios are best positioned to reach their financial goals.

Thank you for the opportunity to be your Trusted Advisor.

The information provided here is for general informational purposes only and should not be

considered an individualized recommendation or personalized investment advice. The investment

strategies mentioned here may not be suitable for everyone. Examples are for illustrative purposes

only. All investing involves risk of loss including the possible loss of all amounts invested.