The Disintermediation Trap: How AI Is Reshaping Four Key Financial Industries

The investment world just witnessed a dramatic mood swing—from AI euphoria to genuine concern about structural disruption. Veteran investor Ed Yardeni recently highlighted a stark reality: markets are no longer celebrating companies exposed to AI; they’re punishing them. The core fear isn’t about short-term earnings; it’s about something far more fundamental: the ability of artificial intelligence to disintermediate traditional middlemen across Software, Brokers, Insurers, and Asset Managers. These four sectors have been hit hardest as investors grapple with an uncomfortable question: if machines can do the job better and cheaper, what role remains for human intermediaries?

Software Companies: When AI Becomes The Disintermediate Force

Software stocks have absorbed the most severe punishment. The iShares Tech-Expanded Software Sector ETF (NYSE:IGV) has lost nearly 20% year-to-date, making it the worst-performing industry group. The culprit isn’t just competition—it’s the possibility that AI-native tools like Anthropic’s Claude could disintermediate entire categories of enterprise software.

Consider what’s happening: historically, companies relied on specialized software providers to handle legal research, financial analysis, and sales optimization. Now, generative AI can perform these workflows directly, potentially rendering traditional application software obsolete. Data providers caught the full brunt of this shift. Thomson Reuters Corp (NASDAQ:TRI) has cratered 31.1% year-to-date and 57.6% from last summer’s peak. RELX plc (NYSE:RELX), parent of LexisNexis, sits down 30% for the year and 47.4% from May’s high. FactSet Research Systems Inc (NYSE:FDX) has slid 30% year-to-date and 57.3% from its December 2024 high. S&P Global Inc (NYSE:SPGI) has fallen 25% in 2026 and 30% from August 2025’s peak.

The math is brutal: if AI can handle specialized workflows, do enterprises still need high-priced software licenses? “For those who lived through the advent of the Internet, this feels like déjà vu all over again,” Yardeni reflected. Forward price-to-earnings ratios have compressed from the mid-30s to the low-20s—Application Software now trades at 23.7x forward earnings down from 35.3x, while Systems Software sits at 23.3x, down from 35.5x. The question haunting investors: is this a genuine bargain, or a rational repricing for a disintermediating threat?

Investment Brokers: The Automation Of Financial Advice

Brokers face their own disintermediation reckoning. The panic intensified when fintech firm Altruist launched AI tools capable of recommending personalized tax strategies—precisely the type of advisory work that has traditionally justified brokerages’ existence and fees. If AI can optimize taxes today, could it manage comprehensive financial advice tomorrow?

The S&P 500 Investment Banking & Brokerage index, tracked by the iShares U.S. Brokers-Dealers & Securities Exchanges ETF (NYSE:IAI), is only modestly positive year-to-date, but individual names have taken harder hits. Raymond James Financial Inc (NYSE:RJF) plunged 9% in a single session—its worst day since March 2020. Charles Schwab Corp (NYSE:SCHW) dropped 8% the same day. The industry’s forward P/E has collapsed from 24.7x to 15.9x.

What troubles investors most isn’t today’s earnings—it’s the durability of tomorrow’s margins. Traditional advisory models built on information asymmetry face structural competition from AI that can disintermediate the advisor-client relationship. If friction in financial advice disappears, where does the human broker fit? That’s the existential question investors are pricing in.

Insurance Distribution: The AI-Powered Quote Engine

Insurance brokers discovered their own vulnerability when OpenAI approved an insurance application for ChatGPT developed by Spanish digital insurer Tuio. Suddenly, underwriting, comparison shopping, and policy quoting became possible within conversational interfaces—functions that have historically belonged to brokers.

The State Street SPDR S&P Insurance ETF (NYSE:KIE), which tracks the S&P Insurance Brokers industry index, has fallen 4% year-to-date, though major players have deteriorated sharply from their peaks. The disintermediation risk is tangible: if customers can generate personalized quotes and compare policies without broker involvement, commission structures face pressure. Yet insurance remains relationship-driven and heavily regulated—incumbents retain structural advantages in compliance and trust. The real question is whether brokers will incorporate AI into their own distribution channels or become victims of disintermediation by third-party platforms.

Alternative Managers: Indirect Collateral Damage

Alternative asset managers occupy an unusual position. They’re not directly disrupted by AI; rather, they’re caught in the crossfire. Yardeni points out that large alternative managers hold significant exposure to private software companies—both through equity stakes and private credit holdings. As public software valuations crater, exit opportunities shrink and concerns mount about portfolio marks deteriorating.

KKR Inc (NYSE:KKR) has fallen 16% year-to-date, while Apollo Global Management Inc (NYSE:APO) has declined 11%. Blue Owl Capital Inc (NYSE:OWL) has already shed more than 50% from its record highs. Before software disintermediation concerns weighed on shares, these managers faced investor anxiety about credit losses buried in private loan portfolios across multiple industries. Now they’re wrestling with compounding pressures: both their private credit books and their software equity investments face headwinds.

Sorting Valuation From Fundamental Risk

The statistical case for value appears compelling. According to Wall Street consensus for 2026, these industries still expect solid earnings growth:

• Financial Exchanges & Data: 7.6% growth, 22.5x forward P/E
• Insurance Brokers: 12.2% growth, 15.9x forward P/E
• Investment Banking & Brokerage: 14.4% growth, 16.9x forward P/E
• Asset Management & Custody Banks: 15.4% growth, 15.5x forward P/E
• Application Software: 17.3% growth, 23.7x forward P/E
• Systems Software: 19.8% growth, 23.3x forward P/E

Multiples have plummeted from mid-30s to low-20s in some sectors, or from mid-20s to mid-teens in others. On paper, the reset looks dramatic—potentially historic. But markets aren’t debating valuation in a vacuum; they’re debating durability of those earnings projections themselves.

“Will AI competition trigger downward earnings revisions as contracts renew and competitive pressures mount?” Yardeni asked. That’s the trillion-dollar question. Current consensus estimates assume these industries successfully navigate disintermediation threats. If that assumption breaks, valuations won’t stabilize—they’ll crater further. Bargains exist, but only for investors confident these intermediaries won’t actually be intermediated away.