The world of technology is abuzz with talk of AI vulnerability (-7%, -5z) and how it’s impacting the industry. With fierce competition heating up, earnings haven’t quite cracked yet, but the valuation premium built up over time is clearly deflating. The Mag7 dispersion is becoming more visible, particularly against the backdrop of continued strength in global AI hardware.

Meanwhile, investors are grappling with the latest disruptions in software and adjacent sectors. Anthropic’s new legal plug-in for Claude has triggered fresh fears of extreme displacement, with Yellow Pages vs Internet style jitters even for businesses loosely tied to AI, such as exchanges or parts of insurance (JPM market intelligence).

Despite prior underperformance (-17.5% YTD) and heavy short build-up (L/S ratio at the 3rd %ile since 2018), investors are jumping to extreme displacement fears, with EU Media (-6% / 5z) and US AM (-7% / 4z) feeling the heat.

As we delve deeper into this topic, it’s essential to understand that AI is not a monolithic entity, but rather a complex ecosystem of technologies, tools, and applications. The impact of AI vulnerability will vary across different sectors and industries, and investors need to be aware of these nuances to make informed decisions.