Stocks in the financial sector have plummeted. What does Meta's new AI agent have to do with this?

Meta’s new artificial intelligence agent— a “personal assistant” available in the Muse app—has reignited concerns that AI will disrupt the traditional financial services industry, according to The Wall Street Journal (WSJ). This triggered a sell-off of financial sector stocks in the U.S. on Tuesday, September 22, including shares of major banks.

Shares of Charles Schwab and LPL Financial fell by more than 6% (in pre-market trading today, they are trading slightly higher, recovering from that decline). Shares of JPMorgan Chase, the country’s largest bank, fell 3.4% on September 22, marking their worst performance since July, according to Barron’s. Wells Fargo shares dropped 3.9%, their steepest decline since May, the publication notes. Shares of Bank of America and Citigroup also ended the day in the red, falling 3% and 2%, respectively. Overall, the S&P 500 banking sector index lost 2.7% on Tuesday. The decline in financial sector stocks kept the broad S&P 500 index near the zero mark the previous day. Meanwhile, the Dow Jones Industrial Average fell 0.4%, while continued gains in chipmakers’ stocks helped the Nasdaq Composite rise 0.5% and hit a new all-time high.

The trend in the financial market was reminiscent of a similar sell-off that occurred in August, when the fintech company Altruist introduced a tool for creating personalized tax strategies, according to the WSJ. However, analysts note that Muse, which has already entered into partnership agreements with players such as PayPal (the service’s customers can make purchases and place orders through Muse with merchants using PayPal worldwide) and the fintech firm Plaid, has far greater potential to transform many fundamental aspects of consumer payments and financial planning. Meta Platforms’ multibillion-user base also creates an advantage for Muse, the newspaper notes.

“It’s not that any single AI agent is turning the sector upside down overnight. But a series of such product launches in recent months has helped shape the narrative that the world is changing and that these changes are bringing greater uncertainty [to the traditional financial services sector],” says Devin Ryan, head of fintech and financial services research at Citizens. However, the threat to established players in the financial sector isn’t limited to the risk that robots might put human financial advisors out of work, the WSJ continues. According to Ryan, in the long run, agents may be able to more effectively reallocate clients’ funds for tax-loss harvesting and other purposes, which could leave brokers with less available cash to generate their own profits. “If an agent is optimizing 24/7, doesn’t that eliminate hidden excess liquidity in the system?” Ryan asked.

Nevertheless, market participants warn that Wall Street’s reaction to the launch of the AI agent Muse—which has already topped the download charts among free apps in U.S. iOS and Android app stores— may ultimately change once traditional players “catch up” and also begin incorporating new technologies into their processes, the WSJ notes. “When you’re steering an ocean liner, you can’t turn it around overnight. For such firms, [the latest technologies] represent a huge opportunity, since they certainly have all the data,” remarked Alois Pirker, founder of Pirker Partners, a consulting firm for asset managers.

“We are seeing growth in the corporate and investment banking segment, as well as steady expansion in our credit card and auto loan portfolios. But I believe the growth rate will be lower than in the first half of the year,” Barron’s quotes Wells Fargo CFO Mike Santomassimo as saying during a financial industry conference organized by Barclays on September 15. In the trading sector, banks also do not expect to replicate the outstanding results of recent quarters, the publication notes.

This article was AI-translated and verified by a human editor