Mid Wynd International Investment Trust Plc

Is the Market Wrong About AI Losers?

Lazard Asset Management Limited (London)

Alistair Boyle

Alistair Boyle is a Director and Portfolio Manager/Analyst on the Global Quality Growth team. He began working in the investment field in 1996 at Deutsche Bank. Prior to joining Lazard in 2025, Alistair held roles in Global Equities at HSBC and JPMorgan, and co-founded Redburn Partners, the UK’s leading independent global research firm, where he was a partner for 17 years. Following Redburn’s merger with Rothschild & Co in 2020, he established Retail Capital Markets at Peel Hunt and later became a private investor and consultant to Smith Market Insight, a macro research firm. Alistair has an MA in Politics from the University of Edinburgh.

20 7448 2002

Alistair.Boyle@lazard.com

Recent weeks have seen sharp swings in the share prices of companies perceived to face even modest AI-related risk. AI applications may have names that sound like cuddly TV characters—Claude and Harvey—but their impact has been anything but gentle.

One could argue that the market is discounting scenarios that seem inconsistent with the strong earnings many businesses continue to report. What began with software companies has since broadened out.

Many of the businesses that have been most affected have included quality companies with high profitability and strong free cash flow—just the sort of businesses we like. Many have shown substantially greater earnings resilience than the market over extraordinary periods of uncertainty. And they are still generating strong returns.

Until recently, these companies were perceived to have durable moats to protect those future earnings from competition some way into the future. The market now seems to think those moats have collapsed—breached by AI. To our mind, it has derated many stocks to a remarkable level. Investors must now ask if it has gone too far and whether, as a result, this is a buying opportunity.

RELX offers a good case study of these dynamics. The quake that set off the most recent tremors was the news that AI giant Anthropic has added customisable plugins to its Claude AI bot. These enable Claude to behave like a highly specialised agent rather than a generalist chatbot.

The legal plugin can, for instance, review documents to highlight risks and track compliance. A sales plugin could connect Claude to a client database to help with researching and following up prospects.

In the legal space, the fear is that Claude will aggressively challenge RELX’s AI product offerings and, since Anthropic is targeting the in-house legal teams in corporates rather than law firms, this could raise the risk that law firms lose business. RELX mainly serves law firms.

Legal represents 12% of RELX’s operating profit.¹ The RELX share price fell over 36% this year between 9 January and 11 February (though it has since recovered more than half those losses).² The market was implying that its law division would become a loss-maker rather than one that is generating >20% operating margins.³ RELX shares had already fallen 20%⁴ in the year prior to this—largely due to what we see as misplaced fears over the impact on its legal business from another AI competitor, Harvey.

You would think the RELX business was struggling. In fact, it is generating attractive profit margins while also growing revenue—in its legal division, revenue growth has accelerated to nearly 10%.⁵ This is because RELX’s own AI product targets areas of the legal industry outside of where the company generates its existing revenue. Its new product already helps lawyers with document summarisation and contract/brief writing, limiting the need for a service like Claude.

RELX’s existing products are proprietary databases and analytics tools that contain and summarise (using AI and expert opinion) case law and statute. These databases are crucial elements of the process. In fact, Harvey has a partnership with RELX to allow its AI agent to access RELX’s content so that it can deliver what it needs. Lawyers still need a contract with RELX to enable this.

Success in this area is driven by the quality of the product, which depends on deep vertical knowledge, as well as distribution, integration with workflows and trust—all of which RELX has in legal and, we would argue, Anthropic does not.

In fact, AI could open up a new and potentially significant market for RELX’s existing product. Today, as mentioned, the company mainly serves law firms. If corporates undertake more work in‑house, then the demand for its core LexisNexis product, which underpins the AI‑assisted contract and brief‑writing tools, could increase. Instead of selling one licence to a lawyer who has, for example, 10 corporate clients, RELX could in principle sell 10 licences for each corporate client.

Quality Assured?

While we recognise AI’s potential to reshape companies and industries, our fundamental analysis suggests that the market is overestimating the near-term disruption risk these new tools pose to many businesses, such as RELX, and at the same time underappreciating the competitive barriers involved. Such companies continue to benefit from deep, specialised datasets and embedded workflows that we believe are not easy to replicate or replace.

The past year may have been challenging for holders of quality-focused investment trusts and funds, including Mid Wynd. While we cannot say with certainty that the worst is over, we do think that at current valuations this area of the market has become considerably more attractive and merits closer attention. For investors, there may be opportunity ahead.

First published in Citywire on 24 March 2026

Notes
1 Source: RELX 2025 Results, as at 12 February 2026
2 Source: Morningstar, as at 11 February 2026
3 Source: RELX 2025 Results, as at 12 February 2026
4 Source: Morningstar, as at 11 February 2026
5 Source: RELX 2025 Results, as at 12 February 2026

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This information has been issued and approved by Lazard Asset Management Limited (“Lazard”), 20 Manchester Square, London, W1U 3PZ. Lazard is investment manager to Mid Wynd International Investment Trust plc (the “Company”) and is authorised and regulated by the Financial Conduct Authority.

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