Logistics stocks plunged on February 12 as the group became the latest victim of the artificial intelligence “scare trade.” At the center of the selloff: a former karaoke company with a stock-market value of only $6 million.

The little-known company is worth just a fraction of the value it knocked off of a constellation of others  — all of which were dumped by investors fearful of even the faintest threat posed by AI. The company’s trumpeting of its logistics platform sent the Russell 3000 Trucking Index sliding 6.6%. CH Robinson Worldwide Inc. tumbled 15% — and at one point was down by a record 24% — while Landstar System Inc. fell 16%. 

It was the worst drop for the sector since April’s trade-war market meltdown. Drug distribution stocks were also caught up in the selloff, with McKesson Corp. and Cardinal Health Inc. both sliding about 4%. Over in Europe, the logistics sector also sank on February 12, with DSV A/S falling 11%, Kuehne + Nagel International AG sliding 13% and DHL Group dropping 4.9%.

The chief executive officer of the karaoke-turned-AI company was among those left shocked by the market action — which began after the company said its SemiCab platform was helping its customers scale freight volumes by 300% to 400% without a corresponding increase in operational headcount.

“Never in my wildest dreams would I ever have imagined a day like today,” said Gary Atkinson, CEO of Algorhythm Holdings Inc. “It’s almost like David versus Goliath.”

The latest companies to be swept up in the selling join real estate firms, software makers, private credit providers, insurance brokerages and wealth managers among the industries battered in recent sessions by fears of AI’s disruptive power. The losses on February 12 came amid a broader risk-off move in markets that saw the Nasdaq 100 Index tumble 2%, while gold, silver and cryptocurrencies also posted steep losses. 

“The level of paranoia is Category 5,” said Joseph Shaposhnik, portfolio manager at Rainwater Equity. “It’s not something that we’ve seen in quite a long period of time.”

The worries over AI-fueled disruption underscore a sea change in market sentiment. Enthusiasm for the technology drove the lion’s share of stock market gains over the last few years. But it has been replaced by worries that the newest tools released by Alphabet Inc.’s Google, closely held AI developer Anthropic and a slew of lesser-known startups are already good enough to threaten a wide array of companies, many far outside the umbrella of technology.

Wall Street has become so jittery about AI that just a whiff of possible disruption is enough to send entire sectors over a cliff. There wasn’t as clear of a catalyst around the real estate selloff that started on February 11, and sent shares of CBRE Group Inc. and Cushman & Wakefield Ltd. to their worst one-day drops since 2020. CBRE Chief Executive Officer Bob Sulentic said on the company’s earnings call on February 12 that if AI leads to decreases in companies’ headcounts and demand for office space, it would be a “long-term trend to unfold.” 

Algorhythm Holdings, which previously traded as The Singing Machine Company Inc., rebranded in 2024 as an AI logistics firm.

“As a CEO of a public company, I have a fiduciary responsibility to the shareholders to look for opportunities that have better growth opportunities,” he said. “We decided to just go all in on freight logistics.” 

Algorhythm reported less than $2 million in sales for the quarter that ended on September 30, with a net loss totaling nearly $3 million for the period. But its shares soared 30% to $1.08 after its announcement, paring what had been a jump of as much as 82% earlier in the session.

“I would probably be more inclined to be skeptical that this particular company is gonna be the one to disrupt the industry,” Citigroup Inc.’s Ariel Rosa said of Algorhythm. “But the notion that someone will eventually come in and try to disrupt the industry seems like a decently high probability.”

CH Robinson in a statement to Bloomberg said it believes AI will only continue to strengthen its performance, while noting that “perceptions of artificial intelligence are influencing recent market activity.” 

Investors had seen transportation as part of the “AI resistant” trade, particularly as volatility in technology names caused a push to diversify portfolios. However, the selloff has proved that even the “old economy” is not immune to the AI concerns that have been wreaking havoc on the market.

“The worry is that it could disintermediate the truck brokers, which is why they’re getting hit so much,” said Christopher Kuhn, a Benchmark analyst covering trucking stocks. “The whole sector is getting hit, but it’s mostly on the broker side.”

“I guess it was their time,” Kuhn added. “I think it’s overdone but we need more detail. But clearly, it’s unlikely that a big corporation is going to put in this software and not use a major truck broker like CH Robinson and RXO.”

Knee-Jerk Reaction

Analysts and investors have warned that some of this steep selling reflects a knee-jerk reaction and could be overestimating the risk.

Barclays analyst Brandon Oglenski defended CH Robinson, as well as other asset-light transport companies, seeing the reaction as “disproportionate to the risk.” Oglenski added that he would be a buyer of the sector on weakness, particularly in CH Robinson shares.

“While the impact from AI over time is inevitable and powerful, stock reactions to news like this tend to be emotional and exaggerated,” said Mark Hackett, chief market strategist at Nationwide.

Meanwhile, investors were desperately trying to game out what sector could be next to get hit by the “AI scare trade.” 

“The $100,000 question is everyone trying to figure out who or what segment is going to be targeted by the market next,” said David Sekera, chief U.S. market strategist for Morningstar. “What we’ve seen is some people have that ‘sell first, ask questions later’ type of mentality.”