The AI ‘scare trade’ is finally hitting banks. Bargain hunters should take note.

The AI "scare trade" is now reaching banks, adding a new layer of uncertainty to a sector already sensitive to shifting deposit behavior. In an era of higher interest rates, banks have benefited from consumers' reluctance to move money out of low-interest checking accounts, which offer convenience and ready access to funds. That sticky deposit base has supported profits.

What's changing is the narrative around artificial intelligence and its potential to disrupt traditional banking operations, from customer service to back-office functions. When a theme like this gains traction, it can weigh on sentiment across the group, even for institutions whose fundamentals remain intact.

For observers, the key question is whether this is a sentiment-driven pullback or the start of a genuine repricing of bank earnings power. Watch how deposit costs and net interest margins evolve alongside any AI-related announcements. If the selloff is broad rather than tied to specific balance-sheet weaknesses, it may draw attention from those assessing longer-term value.