Why the AI attack on software has unnerved so many industries

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Wall Street is getting extremely jumpy about the threat of AI disruption to a widening range of industries. That is the best explanation for the hammering that brokerage and wealth management stocks took this week, thanks to a little-known US fintech company called Altruist.

The idea that an upstart armed with better technology can threaten giants of the finance industry has fuelled various waves of fintech mania over the years. Generative AI has just given a new twist to this — as it has in other industries. As with previous waves of tech disruption, the most exposed are those whose basic product is information — finance, legal services, media and software.

Altruist hardly looks like a serious threat, though it is emblematic of how disruptive competition could intensify because of AI. The company last year launched a service to make investment advisers better at analysing portfolios and recommending investment strategies for their customers. This is the kind of thing fintechs have been doing for years, though services like these are now supercharged by drawing on large language models. The same AI capabilities, of course, are available to established brokers and wealth managers, which have used technology to transform their services. Control of customers and distribution channels, along with deep domain expertise, will continue to be their main defensive strategy.

AI, though, brings a new twist to the story. As AI models are refined and expertise is embedded into agents, the differentiation provided by humans will come increasingly into question. Who controls the agents looks set to become the high ground that many companies, in software and beyond, will want to occupy.

The market’s extreme jumpiness in recent weeks has been stoked by what amounts to a full-frontal attack by AI model-builders Anthropic and OpenAI on the software industry. And by “software”, you can include any service that relies heavily on technology for its creation or delivery.

Uncertainty about what role the AI companies see for themselves in the enterprise technology world is adding to the market’s fears. Anthropic was first to move, repurposing its coding agent to act as a more general agent capable of carrying out a wide range of functions for non-technical workers.

What took this to the next level was its addition of what it calls plug-ins — specialised skills that its agent, known as Cowork, can use to do things like analyse legal contracts or produce marketing content. It is easy to imagine these skills growing to include many of the things that human workers do, making them the Swiss army knives of software.

This is a serious threat to many different kinds of business. If AI agents created by other companies start to do the work that customers value the most, then incumbents will be pushed into the background. They may still control a customer’s most important data, but they risk being relegated to the role of utilities, merely providing storage for data that other companies turn into valuable services.

For their part, the AI model-builders are playing down the threat and describe themselves as partners rather than challengers. That is not surprising: a large part of their business involves selling access to their models to power the services of other companies that may soon become their competitors.

Their positioning, however, suggests greater competition is inevitable. OpenAI recently laid out big ambitions for Frontier, its own entry in the enterprise software stakes. This includes controlling all the AI agents that may one day want to access a company’s systems, evaluating and optimising their performance, and providing the business context in which all of this takes place. These are the sort of functions that existing enterprise software companies see as their natural turf. If Frontier controls this new layer of software, orchestrating the agents, it pushes others further into the background.

This battle is only just coming into focus. The incumbents have already shown that they are ready to defend their territory. That includes companies like Salesforce, which last year blocked access to third-party AI services that wanted to draw data from its Slack communications service. But blocking new services from third party companies will not make them popular with their own customers. Incumbents need to move fast themselves to create similar services, while also cementing themselves at the centre of the emerging agent universe.

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