Last year, Algorhythm (RIME) was just a struggling karaoke-machine maker.

That is, until it announced a pivot to AI and appeared to threaten the transportation and logistics sector, wiping out roughly $17 billion in market value for a company exposed to that sector.

In today’s AI-driven market, all it takes is the mention of the word “AI” to make or break companies and completely roil markets.

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Last year, Algorhythm (RIME) was just a struggling karaoke-machine maker.

Fast forward to last week, it blew up the stock market.

Algorhythm used to go by “The Singing Machine Company.” It got its start in the 1980s, and later claimed to be the global leader in portable karaoke machines.

At-home concerts aren’t the booming business they were four decades ago. The Singing Machine Company scraped together a few decent years in the 2010s, licensing to late-night host James Corden’s Carpool Karaoke segment.

By 2024, though, revenue was down to just $24 million—a 13-year low.

That’s when CEO Gary Atkinson did something drastic. He gave up on karaoke machines and started chasing AI.

In mid-2024, The Signing Machine bought a logistics company called SemiCab.

A few months later, it changed its name to the more ambiguous Algorhythm.

Nobody paid much attention to Algorhythm for the next year or so. It officially sold the karaoke business last August. But otherwise, it stayed pretty quiet as its shares continued to slide.

By November 2025, shares had fallen 99%, putting Algorhythm in danger of being delisted from the Nasdaq.

The company needed a miracle to boost shares..

Suddenly, it was everywhere. Atkinson appeared on Fox Business, claiming Algorhythm’s AI-logistics technology could quadruple freight productivity without additional staff. The Wall Street Journal picked up the story. So did CNBC and Bloomberg.

Nobody should have cared this much. Algorhythm had a market cap of less than $20 million. Most people hadn’t even heard of it until the Fox Business interview.

But the market lost its mind.

Algorhythm’s alleged software posed a direct threat to the transportation and logistics sector. Logistics provider C.H. Robinson (CHRW)—a $20 billion-plus industry giant—plunged 15% in a day. J.B. Hunt Transport Services (JBHT), a trucking powerhouse worth roughly the same, dropped 5%.

The announcement wiped out a total of $17.4 billion in market value, all because of a $17 million former karaoke-machine maker.

These anomalies shouldn’t happen. However, these are becoming more and more common.

This year alone, new AI developments have caused several rounds of panic selling in niche industries. Investors are terrified that tiny AI startups can replicate big Software as a Service (“SaaS”) products. It’s been dubbed the “SaaSpocalypse.”

We saw a similar situation back in January, when AI juggernaut Anthropic updated its Claude Code and Cowork platforms. These tools can compete with ChatGPT, help automate programming projects, and even quickly develop software for the legal and medical fields.

The entire software sector sold off on the news. The S&P Software & Services Select Industry Index plummeted 20%. Many companies that took a hit had nothing to do with those niches.

Some of these updates could be game changers. They could disrupt some of today’s biggest companies.

But it’s far too early to say for sure. And in the meantime, multibillion-dollar giants—and entire sectors—have no business selling off every time someone name-drops “AI.”

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research