Meta's Muse shakes the market

Meta's latest consumer AI product Muse sent shockwaves through the brokerage sector Tuesday. Charles Schwab shares fell six percent, touching their lowest level since early July.

Schwab down, Robinhood up

Schwab stock is now down more than eight percent since Meta announced Muse. Robinhood's stock rose Tuesday to notch another year-to-date high, reviving a long-time rivalry between the fifty-five-year-old investing giant and the post-Covid trading boom icon.

Broader brokerage selloff

LPL Financial Holdings dropped seven percent Tuesday. Raymond James Financial shed three point five percent. Interactive Brokers slipped one percent. The State Street Financial Select Sector SPDR ETF lost two percent and is now down six percent from highs made earlier this month.

What Meta's Muse actually does

Meta's AI assistant says it won't trade for users or give financial advice. But when queried about mimicking financial advisor work, it lists abilities including tracking investments and progress towards goals, and analyzing how portfolio holdings fit together.

The threat to legacy brokers

Piper Sandler analyst Patrick Moley wrote in April that AI and tokenization threaten to dismantle the frictions that legacy financial intermediaries have historically monetized. Schwab's reliance on low-yielding sweep cash puts it squarely in the crosshairs.

“AI and tokenization threaten to dismantle the frictions that legacy financial intermediaries have historically monetized.”

Traders bet against Schwab

Options volume in Schwab was more than five times average Tuesday, with nearly twice as many puts bought versus calls. The most popular contract was the ninety-strike put expiring mid-January, betting the stock drops another thirteen percent in three months.

Robinhood traders see upside

Robinhood options sentiment was opposite. Traders bought twice as many calls as puts, with more than eighty percent of the ninety-five million dollars in premium traded tied to calls. The most heavily traded contract was the one hundred twenty-five-strike call expiring Friday.