Dow drops 500 points, S&P 500 sheds 1% as AI disruption fears spread

Stocks dropped on Thursday as investors began to worry about the negative side of the artificial intelligence buildout, which threatens to disrupt the business models of whole industries and raise unemployment.

The Dow Jones Industrial Average shed 530 points, or 1.1%. The broad market index dropped 1.1%, while the Nasdaq Composite lost 1.5%.

Certain pockets of the stock market have been hit this year on the release of AI tools that could replicate their businesses — or at least eat away at their profit margins.

Financial stocks such as Morgan Stanley came under pressure on fears that AI would disrupt wealth management businesses, while trucking stocks such as CH Robinson plummeted 22% on fears that AI would streamline their logistics business, thereby hurting certain revenue lines for logistics companies.

AI disruption fears even spread to the real estate sector, hurting stocks like CBRE and SL Green Realty, on the notion higher unemployment will hit demand for office space.

Software stocks — a group that has been plagued by disruption worries in recent weeks — extended their year-to-date losses in the session, with Salesforce shares down 2% to lead the Dow's move lower. That stock's fall this year stands at more than 31%. Shares of Autodesk dropped more than 5%, and its year-to-date slide is now 26%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 3% — the fund now stands about 32% below its recent high.