Former karaoke equipment company Algorhythm Holdings claims that its AI logistics platform can help customers increase freight volume by 300%-400% without increasing manpower, raising concerns about AI disrupting traditional industries. On Thursday, the logistics sector plummeted, with the Russell 3000 Trucking Index falling 6.6%, CH Robinson dropping 15%, the Nasdaq 100 declining 2%, and gold and silver also being sold off.
The US logistics sector suffered a significant blow on Thursday, becoming the latest victim of artificial intelligence (AI) ‘panic trading,’ with a former karaoke equipment company, now valued at only $6 million and largely overlooked by the market, at the center of this storm.
On February 12, Bloomberg reported that Algorhythm Holdings Inc., a small micro-cap company, issued a statement about its AI logistics platform, claiming it could help clients increase freight volume by 300% to 400% without adding operational staff. This announcement subsequently triggered a market capitalization loss several times the company’s value as investors exhibited extreme panic over even the slightest threat of AI disrupting traditional industries.
On the same day, the Russell 3000 Trucking Index fell by 6.6%. Industry giant CH Robinson Worldwide Inc. closed down 15%, hitting an intra-day record drop of 24%, while Landstar System Inc. also declined by 16%.
This sell-off not only marked the worst single-day performance for the sector since April of the previous year but also quickly spread to pharmaceutical distributors and European markets. McKesson Corp. and Cardinal Health Inc. both fell by around 4%, while Denmark’s DSV A/S and Switzerland’s Kuehne + Nagel International AG dropped by 11% and 13%, respectively.
Notably, Thursday’s sell-off was part of a broader risk-averse movement. The Nasdaq 100 Index fell by 2%, while gold, silver, and cryptocurrencies also saw substantial declines. The market is shifting from an enthusiastic embrace of AI technology to deep-seated fear of its disruptive power. As mentioned in a Wall Street article, underlying concerns about AI’s potential to disrupt business models across many industries, compounded by the largest drop in US existing home sales in four years, triggered widespread risk aversion.
Analysts pointed out that this indicates a fundamental shift in market sentiment. Even sectors traditionally viewed as ‘AI-immune,’ such as conventional transportation, are no longer spared. Joseph Shaposhnik, portfolio manager at Rainwater Equity, described the current level of market paranoia as a ‘Category 5 hurricane’—a phenomenon unseen for a long time.
From Karaoke Equipment to AI Logistics
The report stated that Algorhythm Holdings was formerly known as The Singing Machine Company Inc. On Thursday, it announced that its SemiCab platform could help clients increase freight volume by 300% to 400% without increasing operational personnel. The company was renamed as an AI logistics firm in 2024.
The company’s CEO, Gary Atkinson, stated that part of the reason for the company’s pivot toward AI was due to tariffs on Chinese karaoke equipment imports damaging its original business. As the CEO of a publicly traded company, he believes he has a fiduciary duty to seek better growth opportunities for shareholders and therefore decided to ‘go all in’ on freight logistics.
Despite Algorhythm generating less than $2 million in quarterly sales as of September 30 and posting a net loss of nearly $3 million, its stock price surged by 82% at one point after the announcement before closing up 30% at $1.08.
However, this minor uptick triggered the collapse of industry giants, leaving Gary Atkinson stunned. He described the day as a ‘David versus Goliath’ moment, something he had not envisioned even in his wildest dreams would provoke such a dramatic market reaction.
Spread of Panic and ‘Sell First, Ask Questions Later’
Wall Street’s nerves over AI have reached a tipping point, where any hint of potential disruption is enough to send the entire sector into a downward spiral.
Logistics companies have become the latest sector to be hit by the recent wave of AI-related panic. Previously, real estate firms, software manufacturers, private credit providers, insurance brokers, and wealth management companies were all severely affected by concerns over AI-driven disruption.
Analysts believe that the anxiety caused by AI highlights a significant shift in market sentiment. Over the past few years, enthusiasm for the technology fueled much of the stock market’s rise, but now that enthusiasm has been replaced by concern.
Investors are worried that the latest tools launched by Alphabet Inc.’s Google, Anthropic, and numerous startups have become powerful enough to threaten a wide range of companies outside the tech sector.
This sentiment has led to a ‘sell first, ask questions later’ mentality. David Sekera, Chief U.S. Market Strategist at Morningstar, noted that everyone is currently trying to figure out who or which segment will be the next target of the market.
Ironically, investors had previously viewed the transportation industry as part of an ‘AI-resistant’ trade, especially amid increased demand for portfolio diversification driven by volatility in tech stocks. However, this sell-off proved that even the ‘old economy’ is not immune to the impact of AI-related fears.
“The concern is that AI might eliminate the role of truck brokers, which is why they were hit so hard,” said Christopher Kuhn, an analyst at Benchmark. “The entire sector is falling, but it’s mainly on the broker side.”
However, Kuhn added, “I think it’s their turn. I believe the reaction is exaggerated, but we need more details. Clearly, large companies are unlikely to stop using major truck brokers like CH Robinson and RXO after installing this software.”
Analysts warn of an overreaction in the market.
Several analysts and investors have warned that some of the sharp sell-offs reflect knee-jerk reactions, potentially overestimating the risks.
Barclays analyst Brandon Oglenski defended CH Robinson and other asset-light transportation companies, stating that the market reaction is “disproportionate to the risks.” Oglenski mentioned that he would buy this sector on weakness, particularly CH Robinson shares.
Ariel Rosa of Citigroup stated:
“I might be more skeptical that this particular company will be the one to disrupt the industry. However, the likelihood that someone will eventually come in to attempt to disrupt the industry seems quite high.”
Mark Hackett, Chief Market Strategist at Nationwide, stated:
“While the long-term impact of AI is inevitable and powerful, the stock market’s reaction to such news tends to be emotional and exaggerated.”
