"The damage came from the tech and software sector, as investors began to realize that the promise of AI won't always be sunshine and roses. Until recently, the markets had assumed that companies would be buoyed by the massive amount of capex going into AI, and that AI would generate new efficiencies and higher productivity that would ultimately result in higher revenues and earnings per share."
"As much as $1 trillion was wiped off the market cap of software companies yesterday, according to Bloomberg. Alphabet closed down nearly 2% yesterday and lost a further 2.53% overnight after revealing on its earnings call that it planned to double AI capex. That's a problem because until very recently the performance of the S&P 500 was governed by the heavy weight of tech stocks, like Alphabet, within it."
S&P 500 futures were flat-to-up before the New York open after the index fell 0.51% to 6,882 following recent volatility around the 7,000 level. Global markets were flat or down, with South Korea's KOSPI losing 3.86%. The selloff concentrated in tech and software as investors reassessed AI, fearing it can destroy revenues of traditional software and prompt massive capex. As much as $1 trillion was wiped from software market caps. Alphabet fell further after announcing plans to double AI capex. The S&P 500 remains concentrated: the 10 largest companies accounted for nearly 41% of its weight by end of 2025. The equal-weight S&P 500 hit a record high as non-tech firms held up.
Read at Fortune
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