Tech Stocks Dip as AI Doubts Linger on Wall Street

Dan Skelly, Head of Market Research & Strategy at Morgan Stanley Wealth Management, discusses AI capex expansion and valuation pressures.

A selloff in several tech giants weighed on stocks amid lingering anxiety over the outlook for artificial intelligence that has recently hammered the group as well as dozens of companies across a number of industries. Bitcoin extended its February rout. Gold sank.

The Nasdaq 100 deepened a plunge that’s already putting the index on track for its worst month since March 2025. A key gauge of chipmakers like Nvidia Corp. and Broadcom Inc. slipped 1.5%. A closely watched exchange-traded fund tracking software firms dropped 2.9%. The slide in tech drove the S&P 500 below a key technical level: its average price of the past 100 days.

The turmoil unleashed by AI reflects fears that are increasingly at odds. One is that it’s poised to disrupt entire segments of the economy so dramatically that investors are dumping the stocks of any company seen at the slightest risk of being displaced by the technology. The other is a deep skepticism that the hundreds of billions of dollars spent in AI will deliver big payoffs anytime soon.

In what’s turning out to be a great quarter for corporate earnings growth, mentions of AI disruption on management calls almost doubled compared to the previous quarter, a Bloomberg News analysis of transcripts shows. While the technology hasn’t yet noticeably reduced earnings estimates, investors aren’t waiting around and instead are selling any company perceived to be at risk. Traders struggling to assess the outlook for artificial intelligence sent Wall Street to another volatile day, a session that saw big losses in stocks wane by midday. Bitcoin extended its February rout. Gold sank.

Following a slide that approached 1% earlier Tuesday, the S&P 500 was little changed. The US equity benchmark bounced after briefly breaching a key technical level - its average price of the past 100 days. While a closely watched gauge of chipmakers wiped out its decline, an exchange-traded fund tracking software firms slipped 2%. Financial and industrial companies rose.

Tech stocks fall on AI angst.

The turmoil unleashed by AI reflects fears that are increasingly at odds. One is that it’s poised to disrupt entire segments of the economy so dramatically that investors are dumping the stocks of any company seen at the slightest risk of being displaced by the technology. The other is a deep skepticism that the hundreds of billions of dollars spent in AI will deliver big payoffs anytime soon.

In what’s turning out to be a great quarter for corporate earnings growth, mentions of AI disruption on management calls almost doubled compared to the previous quarter, a Bloomberg News analysis of transcripts shows. While the technology hasn’t yet noticeably reduced earnings estimates, investors aren’t waiting around and instead are selling any company perceived to be at risk.

“The market is still close to records highs, but it may not feel that way to some investors because of the sharp selloffs that seem to derail upswings almost as soon as they begin,” said Chris Larkin at E*Trade from Morgan Stanley. “If that theme persists, it could result in a bumpy road for the market, even if the overall trend is to the upside.”

Traders this week will also be on the lookout for economic data and minutes from the Federal Reserve’s January meeting for insights into the timing for rate cuts. Fed Bank of Chicago President Austan Goolsbee told CNBC there’s potential for more reductions this year, if inflation continues to return towards the central bank’s 2% target.

About 260 shares in the S&P 500 rose, with the gauge hovering near 6,840. The yield on 10-year Treasuries was little changed at 4.05%. Bitcoin dropped to around $67,500. The dollar rose 0.2%. The pound slid as data showing UK unemployment at a five-year high prompted traders to boost bets on rate cuts.

Oil slipped on signs that the US and Iran have made progress in nuclear talks. Gold sank below $4,900 an ounce, with much of Asia, the top consuming region, closed for the Lunar New Year.

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