The stock market appears to be doing just fine, with the FTSE 100 and S&P 500 not far off all-time highs. But underneath the surface, there’s extraordinary turbulence.
In particular, software-as-a-service (SaaS) and tech/data platform stocks have been absolutely hammered. From peak to now, shares like Salesforce, ServiceNow, Adobe, Snowflake, Rightmove, and London Stock Exchange Group are down between 30% to 55%.
The world’s largest software company, Microsoft, has even started wobbling. The firm’s recent earnings showed that while it’s spending more on AI, growth in its cloud unit (Azure) actually levelled off, spooking the market.
This has tipped the software sector into a bear market, which is typically defined as a drop of 20% or more from recent highs.
In contrast to this, semiconductor-related stocks like Micron Technology and ASML have hit new heights.
Where’s the money?
Stepping back, what’s happening here is the market is separating firms making money via AI from those that are currently not.
For example, Micron posted 57% revenue growth in its Q1 2026 results. For Q2, it anticipates “substantial records across revenue, gross margin, EPS and free cash flow“.
As for Rightmove, the property portal said it’s going to spend more money than previously announced on AI. While this should improve its platform features, investors are concerned that it’s having to spend more cash to essentially stay where it already is (already dominant).
After three years of hype and giddy expectations, the market is suddenly saying: “Show us the money“. In other words, investors now want to see AI spending produce tangible returns.
Disruption fears
However, there’s another layer, which is potential disruption from autonomous AI agents. The concern here is that agentic AI lowers the barrier to entry for upstarts, possibly reducing the need for expensive enterprise software.
If the impact is limited to software, I don’t fear a market crash. But if an AI agent can eventually do the work of five people, companies need fewer software licences. That means fewer human workers, and this is where I see potential risk for the stock market.
Fewer people employed would have huge ramifications for businesses across travel, retail, e-commerce, office REITs, and even banks (rising defaults).
Trusty trash
I don’t see the Ai crash threat as imminent. But to minimise risk, investors could consider ‘boring’ stocks viewed as safe from AI disruption to increase diversification.
Take WM (NYSE:WM), formerly Waste Management. It’s North America’s largest rubbish and recycling company.
Whether AI or humans do certain jobs, rubbish still needs collecting. And this makes the firm safer from AI disruption.
Or does it? If AI replaces a lot of jobs and consumption falls, could rubbish volumes follow? More restaurants and small shops might disappear, along with their bins.
Despite these potential risks, I see WM operating in three resilient areas. There’s household, with people still producing waste at home, no matter what. Then there’s the medical waste industry, which is incredibly predictable.
And finally, the company produces renewable natural gas (RNG) by capturing methane from its landfills. The company is even using this RNG to fuel its own fleet of collection lorries!
The stock trades at 27 times forward earnings, which isn’t conventionally cheap. But given the reliable business model, I think this could be a solid compounder to consider today.
