A market capitalization of $6 million "small shrimp" overturned logistics giant: AI panic spread to the freight sector, Russell 3000 Freight Index plummeted by 6.6%

On Thursday, the logistics sector of the US stock market collectively plummeted, becoming the latest victim of the current round of panic trading in artificial intelligence (AI). The core trigger of this selling frenzy turned out to be a small company with a market value of only 6 million US dollars, which used to focus on karaoke business - Algorhythm Holdings (RIME.US). This unknown small company's market value is far less than the total market value of the various companies it affected - all because investors fear even the slightest AI threat and began to sell off. After the company aggressively promoted its logistics AI platform, the Russell 3000 freight index plummeted by 6.6%. Robinson Logistics (CHRW.US) plunged 15%, hitting a record decline of 24% at one point during the trading day; Landstar Transportation (LSTR.US) also dropped 16%. This was the worst single-day decline for this sector since the market crash triggered by the trade war in April. Pharmaceutical distribution stocks also took a hit, with McKesson (MVK.US) and Cardinal Health (CAH.US) both falling by about 4%. Even the CEO of the company that transitioned from karaoke to AI was bewildered by the market's reaction. "I couldn't have imagined such a situation even in my dreams," said Gary Atkinson, CEO of Algorhythm Holdings, "It's like David against Goliath." Recently, industries such as real estate, software, private lending, insurance brokering, and wealth management have suffered severe setbacks due to concerns about the disruptive impact of AI, and now logistic companies have also joined the plummet. Thursday saw a rise in overall market risk aversion, with the Nasdaq 100 index plunging by 2%, and gold, silver, and cryptocurrencies also experienced significant declines. "The market panic has reached a level equivalent to a category five hurricane," said Joseph Shaposhnik, portfolio manager at Rainwater Equity, "We haven't seen this type of emotion in a long time." Concerns about the disruptive impact of AI signal a fundamental shift in market sentiment. In recent years, the enthusiasm for AI technology has been a core driver of the stock market's rise. Now, market sentiment has been replaced by panic - investors are worried that the latest AI tools launched by Alphabet Inc. Class C (GOOGL.US), Anthropic, and other niche startups are enough to threaten a large number of companies and extend beyond the tech industry. Wall Street is now on edge about AI, and even the slightest hint of potential impact is enough to send the entire sector into a tailspin. The selling off of real estate stocks on Wednesday also lacked a clear catalyst, yet CBRE Group, Inc. Class A (CBRE.US) and Cushman & Wakefield (CWK.US) set their worst single-day declines in 2020. Bob Sulentic, CEO of CBRE Group, Inc. Class A, stated during a Thursday earnings call that if AI leads to layoffs and a decrease in office space demand, this will be "a long-term trend." Algorhythm Holdings, formerly known as The Singing Machine Company, primarily sold karaoke equipment before rebranding and transitioning into an AI logistics company in 2024. The company announced that its SemiCab platform could help clients increase freight volume by 300% - 400% without the need to increase operational staff. Atkinson mentioned that one reason for the company's AI transition was the imposition of tariffs by the US on imported karaoke equipment from China, leading to damage to their original business. "As the CEO of a listed company, I have a fiduciary duty to shareholders to find opportunities with more growth potential," he said, "We decided to fully invest in the freight logistics sector." As of the quarter ending on September 30, Algorhythm had revenue of less than $2 million, with a net loss of nearly $3 million in the same period. However, after the news was announced, its share price surged by 30% to $1.08, with an intraday peak gain of up to 82%. "I am personally more inclined to doubt whether this company can truly disrupt the entire industry," Citigroup analyst Ariel Rosa commented on Algorhythm, "But it is certain that there will eventually be companies entering to disrupt the logistics industry, and the likelihood of this happening is quite high." The sell-off in logistics stocks spread to Europe, with Danish freight giant DSV closing down by 11% and Swiss DeXpress Group plummeting by 13%. Previously, investors viewed the transportation sector as a "resistant to AI" sector, especially when technology stock fluctuations intensified, prompting funds to seek diversified allocations. However, this round of sell-offs proves that even "old economy" sectors are not immune to the market-wide panic surrounding AI. "The market is worried that AI will bypass freight intermediaries, which is the core reason for the sector's heavy damage," said Benchmark freight industry analyst Christopher Kuhn, "The entire sector is falling, but the impact is mainly concentrated on the intermediary side." "I think it's their turn to be under pressure," Kuhn added, "I believe the market's reaction is excessive, but more evidence is needed. It's clear that large companies are unlikely to directly adopt such software and abandon mainstream freight intermediaries like Robinson Logistics and RXO (RXO.US)." Overreacting Analysts and investors warned that this significant sell-off is partly due to overreacting or overestimating the risks posed by AI. Barclays analyst Brandon Oglenski defended Robinson Logistics and other light asset transport companies, saying that the market's reaction "severely mismatched with the actual risks." He also stated that he would increase his position in the sector on the pullback, especially in Robinson Logistics' stock. "Although the long-term impact of AI is inevitable and profound, the market's reaction to such news is often emotional and exaggerated," said Mark Hackett, Nationwide's chief market strategist. Meanwhile, investors are currently speculating feverishly about which sector or company will be the next target of the "AI panic trading" impact. "The big question now is which company or sector the market will focus on next," said David Sekera, chief market strategist at Morningstar US, "We see many people adopting a mentality of 'sell first, ask questions later.'" Macro Ripples: The Fed may become the next domino So far, this cyclical sell-off has been confined to the stock market and has not yet spread to the macroeconomic level, affecting discussions on the direction of the Federal Reserve's monetary policy. However, if market turmoil continues, the situation could change. Thierry Wizman, global strategist at Macquarie, warned that if fear-driven investment sentiment persists, the AI issue may even exert substantial pressure on the Federal Reserve. The report pointed out that within the Federal Reserve, hawks either tend to focus on stubborn inflation and a healthy job market as reasons for raising interest rates, while doves may advocate "letting the economy moderately overheat" in exchange for productivity gains to counter the anxiety brought by AI replacing jobs. Wizman wrote, "The 'AI panic trading' seen at the beginning of last week is still curbing investors' risk exposure to US stocks. If the 'AI panic' further depresses sentiment, there may soon be a burden on the hawks to justify easing policy." Meanwhile, the AI threat is gradually being reflected in corporate financial disclosures. According to a study released by the World Federation of Large Corporations last October, nearly three-quarters of S&P 500 companies listed AI as a substantial risk factor in their financial reports, far higher than the 12% in 2023. The organization stated in a statement that this shift highlights "the rapid penetration of AI from the experimental stage into core business systems, and reflects that boards and management are urgently addressing the multidimensional risks posed by this in terms of reputation, regulation, and operations." UBS Group AG strategist Matthew Mish wrote in a recent report to clients that as anxiety surrounding the expectation of disruptive AI continues to grow, investors are searching for any signs of vulnerability in various industries. Mish pointed out, "The February sell-off driven by expectations of AI disruption, behind it is the market's increasing acceptance: AI revolution is not only accelerating penetration in the software industry but will also sweep through many other industries." He added, "The timing of AI disruption is still uncertain, and this uncertainty fog is unlikely to dissipate in the short term."