Markets Split as Tech Pressure Persists
U.S. stocks traded mixed Wednesday as investors digested another wave of earnings and braced for results from Alphabet, with artificial intelligence concerns continuing to weigh on technology shares.
The Dow Jones Industrial Average climbed roughly 0.6%, benefiting from a rotation into more defensive, blue-chip names. Meanwhile, the S&P 500 slipped 0.3% and the Nasdaq Composite dropped more than 1%, extending Tuesday’s tech-led selloff.
AI Anxiety Hits Software and Mega-Cap Tech
The latest pullback reflects growing unease around AI-driven disruption — particularly within the software sector — after recent developments raised questions about pricing power, competitive moats, and long-term margins.
High-profile AI-linked stocks such as Nvidia and Microsoft remained under pressure, contributing to the Nasdaq’s underperformance.
Investors are increasingly rotating out of growth-heavy tech names and into value-oriented stocks as they reassess where AI ultimately creates winners — and where it may compress profits.
Alphabet, Arm Earnings in Focus
Attention now turns to earnings from Alphabet and Arm Holdings, with markets focused on signals around AI demand, monetization, and capital intensity.
That will be followed by Amazon’s results on Thursday, which are expected to further shape sentiment around AI infrastructure spending and cloud growth.
JPMorgan warned that beating earnings estimates alone may no longer be enough. Companies must demonstrate that AI is a tailwind, not a margin risk, to regain investor confidence.
Weak Jobs Data Adds to Unease
Adding to the cautious tone, a new ADP report showed private employers added just 22,000 jobs in January — well below expectations. The data is drawing extra attention due to delays in federal labor reports following the recent government shutdown.
Signs of labor market cooling are reinforcing concerns that economic momentum may be slowing just as corporate spending on AI infrastructure accelerates.
Software Stocks Under Pressure
The selloff in software intensified after new AI tools highlighted the technology’s potential to disrupt enterprise software, finance, legal services, and coding platforms.
The S&P 500 software and services index has now fallen nearly 13% over five sessions and sits about 26% below its October peak — even as the broader S&P 500 recently touched record highs.
WSA Take
This isn’t an anti-AI trade — it’s a selectivity reset.
Markets are no longer rewarding AI exposure by default. Investors want proof that AI drives durable revenue growth without destroying existing business models. Alphabet’s earnings could help clarify whether AI remains a growth catalyst — or a valuation risk — for Big Tech.
For now, the rotation tells the story: certainty beats hype.
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