The Morning Download: Sustaining Competitive Advantage in the Age of AI

Good morning. Financial markets are struggling to cope with the massive, long-term uncertainty posed by AI. They have enough trouble predicting quarterly corporate earnings or economic growth, let alone the looming impact of AI, which is so complex and prone to sudden bursts of change.

The Dow Jones Industrial Average fell 1.7%, or 822 points, on Monday, driven by fears of AI disruption and new trade-policy uncertainty. Remarkably, one factor in the selloff was a 7,000-word futurist exploration of how AI might affect the economy in June 2028. The piece by Citrini Research “tapped into a new strain of fears about AI, painting a dark portrait of a future in which technological change inspires a race to the bottom in white-collar knowledge work,” David Uberti writes in the Journal.

Case in point, shares of International Business Machines tumbled 13% Monday, their worst single-day move since October 2000. The stock began declining sharply in the afternoon after Anthropic said in a blog post that its AI tools can help with modernizing Cobol.

All of this raises the question of how company leaders are supposed to think about competitive advantage in the face of the AI-driven uncertainty.

More after the break.

I spoke to RBC enterprise software analyst Rishi Jaluria about how he views sustainability of companies within his sector. In software, as in any industry with exposure to the disruptive power of AI, survival depends on innovation and their ability to protect their customer relationships.

I don’t think it will be enough to count on the occasional breakthrough. In software and beyond, companies can successfully adapt to the challenges and uncertainties of AI, but that will require leaders who can systematize innovation as a business process and make it core to their company’s culture.

The biggest moat. "I think this is a market environment that doesn't really understand nuance very well,” Jaluria said. Last year, the prevailing sentiment was that software companies would be huge AI beneficiaries, given their data and distribution and incumbency, and obviously the script is flipped. Now, Jaluria said, the thinking is that barriers to entry are coming down and everything can be replicated by AI.

Jaluria thinks the truth is somewhere in between, and that “the biggest moat that matters in this environment is innovation.”

Just as the big cloud providers evolved beyond their original roles in storage and compute, he expected the AI platforms to do more as well.

“The thing that maybe has surprised me is how fast this is happening. Because no matter how quickly you think things are going to happen, they manage to happen faster,” Jaluria said. And he was perhaps a bit surprised by the willingness of AI companies to move into vertical software markets such as life sciences and health care, areas previously thought to be highly protected by domain expertise.

The “interaction vector” shifted years ago from downloaded applications to the cloud, and it could shift again to AI platforms.

As that happens, software companies risk losing the customer relationship if they become mere "static systems of record." Those who embed unique, domain-specific AI innovation will retain engagement and pricing power.

Software companies that manage to sustain innovation will still have a very important role in the customer relationship. And to the extent that they help their customers save money in operations, “you can charge more for that."

How is your company approaching competitive advantage as AI becomes more capable? Let us know.

On 'winning.' JPMorgan CEO Jamie Dimon pushed back Monday on fears that AI would hurt the bank, saying "we'll be a winner." Dimon also said Monday, per Bloomberg, that he was starting to perceive echoes of the runup to the financial crisis. He sees “a couple people doing some dumb things” in lending to boost net interest income. JPMorgan shares fell more than 4% alongside other financial stocks on concerns that AI could disrupt traditional payment models, WSJ reports.

Partners aren't safe. Accenture shares dropped 6.7% on Monday, continuing their 2026 swoon, despite news of a partnership with OpenAI, Barron's reports. The IT consulting giant, along with McKinsey, Boston Consulting Group and Capgemini will become primary avenues for deploying OpenAI Frontier, a new AI platform that helps companies build, deploy and oversee AI agents.

Heads up. Several of the software companies negatively impacted by 2026.s AI disruption report earnings this week, Barron's reports.  Workday results come after the stock market closes on Tuesday, Salesforce and Snowflake will report on Wednesday night, and Intuit will report on Thursday night.

AI distillation dispute. Anthropic said Chinese AI firms DeepSeek, Moonshot AI and MiniMax created over 24,000 fraudulent accounts and prompted Claude more than 16 million times to harvest data and train their own models. Anthropic said the activity by the Chinese developers raised national-security concerns for the U.S.

Earlier OpenAI accused DeepSeek of using the same tactic, called distillation, in which a new system learns from an existing one by asking it hundreds of thousands of questions and analyzing the answers.

Chip startup revives IPO plans. Cerebras Systems has confidentially refiled for an IPO and could list as soon as April, the Information reports. The chip startup, which last month announced a multibillion-dollar agreement with OpenAI, originally filed to go public in 2024, before pulling its listing the following year.

Meta Platforms, AMD agree to AI chips deal. Meta will buy 6 gigawatts of AI computing power from the Nvidia rival in a deal worth over $100 billion, WSJ reports.

Intel partners with SambaNova Systems. Together the chipmakers will develop an AI cloud service run by SambaNova, New York Times reports. 

Apple expands U.S. production. Apple will begin assembling Mac Mini computers in the U.S. later this year at a Foxconn facility in Houston, part of the company's pledge to invest $600 billion in the U.S. over four years. The Mini was responsible for less than 5% of Apple’s sales of Mac computers globally last year, estimates Consumer Intelligence Research Partners. Mac Mini production will continue in Asia, the company said.