Financial markets have a habit of panicking about new technology before they understand it.

It has happened many times before.

Railroads were once feared as dangerous speculation.  Electricity was expected to wipe out entire industries. The internet was supposed to destroy traditional business models overnight.  Instead, each of those innovations ultimately expanded economic opportunity far more than it eliminated it.  Artificial intelligence may be following the same pattern today.

Over the past several weeks, markets have reacted sharply to news coming from AI frontier model companies. One of the most notable developments came on April 10, when Anthropic revealed new capabilities in its AI systems through a cybersecurity initiative known as Project Glasswing.  The technology demonstrated an ability to identify vulnerabilities in software and hardware systems at an unprecedented level. In theory, this type of AI could detect weaknesses across industries ranging from finance to healthcare to infrastructure.  Former Cybersecurity and Infrastructure Security Agency Director Jen Easterly recently wrote about the potential significance of this moment. For decades, she noted, the technology industry has built an enormous ecosystem focused on defending against vulnerabilities in software that should never have existed in the first place. AI, she suggests, may eventually help shift the focus toward building systems that are secure from the start.  That possibility has led many investors to worry that traditional cybersecurity and software companies could face disruption.

Markets reacted quickly.  Software and cybersecurity stocks sold off as investors tried to process what these developments might mean. 

Technology seems to be developing faster and faster, but markets often move even faster than understanding.

Something similar happened about 15 months ago when investors were surprised by the emergence of the low-cost AI chatbot from DeepSeek. At the time, many investors questioned whether companies like Nvidia would still be needed in an AI world where software appeared to be doing more with less computing power.  Nvidia’s stock dropped sharply as a result.  But the underlying data told a different story. AI development ultimately required more computing power, not less. What initially looked like a threat turned into a powerful tailwind.

Today we may be seeing another example of the same pattern.  When investors grow nervous, they often sell first and ask questions later. In the process, strong companies can fall alongside weaker ones.

For long-term investors, that environment can create opportunity. Technological revolutions rarely eliminate entire industries. Much more often they reshape them. Artificial intelligence will almost certainly change how software and cybersecurity are built and deployed. But the more likely outcome is not the disappearance of those industries — it is their evolution.

The key during periods like this is not predicting every headline.  It is understanding what you own and why you own it. Because when markets are reacting emotionally, disciplined investors who rely on data and fundamentals often find the best opportunities which we strive daily to do for you.

If you would like to discuss these developments or learn more about how we are positioning portfolios in response to changing market conditions, please feel free to contact our office. As always, we welcome your questions about the markets and your portfolio.