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Welcome back! Brokerage stocks were among the latest stocks to sell off last week on fears artificial intelligence would replace the financial institutions’ role as investment advisers. While those worries may be overblown, it’s easy to see why traders are skittish. Take the case of IDX Advisors, a Scottsdale, Ariz.-based asset management firm with around 10 employees. IDX previously used financial analytics and forecasting applications from Morningstar and FactSet as part of its investment research. But last year, IDX dumped those apps and used Anthropic’s Claude Code to develop alternatives that use its own in-house data. Ben McMillan, founder and chief investment officer at IDX, said the move has led to $150,000 in annual cost savings for his firm, which generates under $5 million in revenue annually. “AI may redefine how decisions are surfaced, but it still depends on the institutions and platforms that power the intelligence beneath it,” Patrick Starling, SVP of enterprise AI at FactSet, said in an emailed statement. A Morningstar spokesperson didn’t have a comment. IDX’s experience shows the impact AI coding tools can have in specialized industries where businesses may have little to no experience in developing software. While IDX has plenty of in-house programming expertise, its developers are wholly focused on using AI for financial analytics and forecasting, McMillan said. The investment firm, which is regulated by the Securities and Exchange Commission, is also using AI to reduce the hefty legal costs it incurs from ensuring that it adheres to the agency’s requirements. IDX has been able to reduce its lawyers’ billable hours by 70% to 80% by using agents to scan through internal systems and legal documents, yielding around $1 million in annual cost savings, said McMillan. To ensure that the agents don't rely on the inaccurate answers that AI models sometimes provide, known as hallucinations, IDX writes its prompts with specific instructions for the models not to speculate, he said. The firm also instructs the AI to provide specific citations in its results, as opposed to pulling from the data they were trained on, he added. An Enterprise Software Bright Spot Cloudflare’s shares jumped 5% after its fourth-quarter earnings last week, and it wasn’t just because the cloud networking and cybersecurity company had a strong quarter. Investors seem to think Cloudflare, which manages web traffic and cybersecurity for around 20% of the internet, is well-positioned to benefit as companies launch more AI agents. AI agents, which handle multi-step tasks like processing invoices and resolving IT service tickets without human intervention, are generating “an order of magnitude more” internet traffic than traditional applications, Matthew Prince, co-founder and CEO of Cloudflare, said on a conference call with analysts after the earnings report. Last month, the volume of weekly requests that agents made to cloud servers on Cloudflare’s content delivery network, which helps videos and images load quickly on websites, more than doubled, according to Prince. “If AI agents are the new users of the Internet, Cloudflare is the platform they run on and the network they pass through,” Prince said on the call. Prince has talked about this in the past, but his message carries more weight at a time when many investors fear that AI is poised to decimate the enterprise software industry. Cloudflare seems to think the ball is moving into its court, as agents that are constantly tapping into applications from various providers are expected to make networking and security more important. At the same time, Cloudflare is looking to highlight its capabilities as a software development platform, a market it entered nearly a decade ago. That will require changing how customers perceive Cloudflare, but if it works, the company could significantly raise its profile with corporate technology buyers and developers building agents. “Often people see us as a network, but in reality, we think of [ourselves as] a developer cloud, and we are building a lot there. So we also benefit when people want to go and build agents,” said Matt Silverlock, a VP of product at Cloudflare, in an interview.
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