Meta’s Muse AI Launch Triggers Selloff in Traditional Brokerage Stocks

Shares of Charles Schwab plummeted 6% on Tuesday, marking its lowest level since early July, as Meta’s introduction of its new consumer AI tool, Muse, reignited concerns across Wall Street regarding the disruptive potential of artificial intelligence in the financial services sector. The announcement has also intensified a competitive rivalry between the 55-year-old investing giant and Robinhood, a brokerage that gained prominence among younger investors during the post-pandemic trading boom.

Since Meta revealed Muse, Schwab’s stock has dropped more than 8%. In contrast, Robinhood’s shares climbed to a new year-to-date high, fueled by its May launch of AI agents capable of autonomously trading and managing user portfolios. The market reaction extended beyond the two major firms; LPL Financial Holdings fell 7%, Raymond James Financial declined 3.5%, and Interactive Brokers slipped 1%. Additionally, the State Street Financial Select Sector SPDR ETF (XLF) lost 2%, bringing its decline from earlier monthly highs to 6%, a downturn potentially compounded by elevated interest rates.

This is not the first instance of AI developments unsettling this group of stocks. In February, shares of Schwab, LPL, and others dropped after tech platform Altruist announced its “Hazel” product, which can generate tax-planning strategies. While Schwab managed to recover in the subsequent months, LPL has not regained similar ground.

Jimmy Lee, founder and CEO of Las Vegas-based advisor The Wealth Consulting Group, which oversees $8 billion in assets, described Schwab’s position as complex. He noted that while Meta may not pose a direct threat from a custodian perspective like Altruist did, the broader landscape for financial middlemen who charge fees for billing, reporting, and trading is undergoing significant disruption.

Although Meta’s Muse assistant states it will not execute trades or provide financial advice, it demonstrates capabilities in tracking investment progress and analyzing portfolio construction when prompted to mimic the work of a financial advisor. In response to shifting market dynamics, Schwab Advisor Services recently announced a partnership with Anthropic to develop “Claude for Financial Advisors,” following the launch of its own tailored AI research tool in May. Representatives for both Schwab and Robinhood declined to comment on the recent market movements.

Despite the recent volatility, Robinhood has seen a robust recovery, rallying 10% on the year after shedding more than 40% in the first quarter. Over the past three years, the retail-focused platform has surged 1,200%. Schwab is up 83% year-to-date, while the XLF has gained 65%. Piper Sandler analyst Patrick Moley highlighted in an April note that AI and tokenization threaten to dismantle the historical frictions monetized by legacy financial intermediaries, stating that Schwab’s reliance on low-yielding sweep cash places it squarely in the crosshairs of these technological shifts.