The trigger for the "Black Thursday" that ignited the US stock market was this $6 million "small company."

The logistics sector of the U.S. stock market faced a sharp decline on Thursday, becoming the latest victim of the artificial intelligence (AI) "panic trading," with the center of this storm surprisingly being a little-known former karaoke equipment company with a market value of only $6 million.

On February 12, Bloomberg reported that this micro company, Algorhythm Holdings Inc., released a statement about its AI logistics platform, claiming that it could help customers increase freight volume by 300% to 400% without adding operational staff, which subsequently triggered a market value evaporation several times its own worth, as investors exhibited extreme panic over even the slightest threat of AI disrupting traditional industries.

On that day, the Russell 3000 Trucking Index fell by 6.6%. Industry giant CH Robinson Worldwide Inc. dropped 15%, plummeting by a record 24% at one point during the day, while Landstar System Inc. also fell by 16%.

This sell-off not only marked the worst single-day performance for the sector since April of last year but also quickly spread to pharmaceutical distributors and European markets. McKesson Corp. and Cardinal Health Inc. both saw declines of around 4%, while Denmark's DSV A/S and Switzerland's Kuehne + Nagel International AG fell by 11% and 13%, respectively.

Notably, Thursday's sell-off was part of a broader risk-off action, with the Nasdaq 100 Index dropping 2%, and significant declines in gold, silver, and cryptocurrencies, as the market shifted from a fervent embrace of AI technology to a deep fear of its disruptive power. According to an article mentioned by Wall Street Journal, the market's deep concerns about AI disrupting numerous industry business models, combined with the largest decline in U.S. existing home sales in four years, triggered risk-off sentiment in the market.

Analysts pointed out that this indicates a fundamental shift in market sentiment, as even the traditional transportation industry, previously seen as "AI immune," is now hard to escape. Joseph Shaposhnik, a portfolio manager at Rainwater Equity, described the current level of paranoia in the market as a "Category 5 hurricane," a phenomenon not seen in a long time.

From Karaoke Equipment to AI Logistics

Reports indicate that Algorhythm Holdings was formerly known as The Singing Machine Company Inc., which announced on Thursday that its SemiCab platform could help customers increase freight volume by 300% to 400% without adding operational staff The company will be renamed AI Logistics Company in 2024.

The company's CEO Gary Atkinson stated that part of the reason for the company's transformation towards AI is due to tariffs on imported karaoke equipment from China, which have harmed 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, thus deciding to "fully commit" to the freight logistics sector.

Although Algorhythm's quarterly sales for the period ending September 30 were less than $2 million, with a net loss of nearly $3 million, its stock price soared 82% shortly after the announcement, ultimately closing up 30% at $1.08.

However, this slight increase triggered a collapse among industry giants, leaving Gary Atkinson shocked, describing the day as "David versus Goliath," and he never anticipated such a drastic market reaction even in his wildest dreams.

Panic Spreads and "Sell First, Ask Questions Later"

Wall Street's nerves regarding AI have reached a critical point, where any hint of potential disruption is enough to push the entire sector into the abyss.

Logistics companies have become the latest industry to suffer from the shock of AI panic. Previously, several sectors, including real estate firms, software manufacturers, private credit providers, insurance brokers, and wealth management companies, have been severely impacted by concerns over AI disruption.

Analysts believe that the anxiety triggered by AI highlights a significant shift in market sentiment. Over the past few years, enthusiasm for the technology has driven much of the stock market's rise, but now that enthusiasm has been replaced by worry.

Investors are concerned that the latest tools launched by Alphabet Inc.'s Google, Anthropic, and numerous startups are powerful enough to threaten a wide range of companies beyond the tech sector.

This sentiment has led to a "sell first, ask questions later" mentality. Morningstar's Chief U.S. Market Strategist David Sekera pointed out that everyone is currently trying to figure out who or which segment will be the next target of the market.

Ironically, investors previously viewed the transportation industry as part of the "AI-resistant" trades, especially as volatility in tech stocks increased the demand for portfolio diversification. However, this sell-off proves that even the "old economy" cannot escape the impact of AI concerns.

"The worry is that AI could eliminate the intermediary role of truck brokers, which is why they have been hit so hard," said Benchmark analyst Christopher Kuhn. "The entire sector is declining, but primarily in the brokerage area."

However, Kuhn also added, "I think it's their turn. I believe the reaction is overblown, but we need more details. But clearly, large companies are unlikely to stop using major truck brokers like CH Robinson and RXO after installing this software."

Analysts Warn of Overreaction in the Market

Multiple analysts and investors have warned that some of the severe sell-offs reflect a knee-jerk reaction and may overestimate the risks.

Barclays analyst Brandon Oglenski defended CH Robinson and other asset-light transportation companies, believing that the market reaction is "disproportionate to the risks." Oglenski stated that he would buy into the sector during weakness, particularly CH Robinson stock.

Citigroup's Ariel Rosa stated:

"I might be more inclined to doubt that this particular company will be the one to disrupt the industry. But the likelihood that someone will come in and try to disrupt the industry seems quite high."

Nationwide's Chief Market Strategist Mark Hackett stated:

"While the long-term impact of AI is inevitable and powerful, stocks often react emotionally and exaggeratedly to such news."