AI panic spreads, tech stocks drag down US stocks again, real estate stocks plunge for consecutive days, Apple’s market value evaporates by $200 billion in one day.

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On Thursday, June 12th Eastern Time, artificial intelligence (AI) once again became the eye of the market storm, with its disruptive threat spreading from the software industry to logistics, real estate, and other sectors, triggering panic selling among investors.

The three major US stock indexes all closed down by more than 1%, the Nasdaq fell about 2%, marking three consecutive declines. The Dow, which had repeatedly set record closing highs earlier this week, closed below the 50,000-point mark for the first time this week.

Tech stocks were the “culprit” behind Thursday’s sharp drop in US stocks. Cisco’s disappointing gross margin guidance sent its shares tumbling 12%, and the software sector ETF dropped 2.7%. All "Big Tech Seven" stocks closed lower, with Apple leading the decline and losing roughly $202 billion in market value in one day, its second-largest single day loss ever since listing.

From logistics and transportation to commercial real estate services, the business model threat posed by AI triggered a chain reaction. The Dow Jones Transportation Index plummeted, and real estate service companies like CBRE and Jones Lang LaSalle saw their shares cumulatively drop more than 25% over two days.

This wave of selling comes amid market doubts over the return on AI investments across multiple industries. Although tech giants’ earnings remain solid, Amazon, Google, Meta and Microsoft are expected to spend about $650 billion combined this year on the AI race, fueling concerns about whether capital expenditures can be monetized.

In the past two years, AI has been virtually the sole driver of the US stock bull market, with funds flowing into chip, cloud computing, software and AI application companies. Yet recently, the market narrative has shifted noticeably: from “who will benefit from AI,” to “who will be replaced by AI.”

Multiple institutions describe that the market is moving from “AI-phoria” to “AI-phobia.” Investors are beginning to re-examine whether AI capital investment is overheated, whether commercialization is falling behind, and more importantly—whether AI is threatening the profitability of certain traditional industries.

Against this backdrop, worries about the realization of AI profits and the “risk of replacement” are spreading rapidly. Software, insurance brokerage, asset management, commercial real estate services and other industries that rely on human and information intermediaries are all under pressure. Combined with cautious sentiment before inflation data release and programmed selling amplifying volatility, the market is undergoing a re-pricing around the AI narrative.

Tech Stocks Under Pressure, AI Investment Returns Questioned

Technology stocks were the main drag on Thursday’s market decline, as investor anxiety over whether AI investment can generate actual returns continued to ferment.

Networking equipment giant Cisco plunged 12%. The company’s post-earnings report Wednesday showed a declining adjusted gross margin for the quarter, below Wall Street expectations, indicating rising memory chip prices are eroding profits. This news triggered concerns about cost pressures across the tech sector.

After Lenovo warned that memory chip shortages would create shipment pressures, PC makers HP and Dell Tech dropped 4.5% and 9.2% respectively.

Software stocks were once again under pressure. The S&P 500 software index fell about 1.5%, after rebounding more than 3% over the previous two days from last week’s sharp drop.

Despite reporting fourth-quarter earnings and sales above expectations and attempting to downplay AI concerns, advertising software company AppLovin slumped 20%.

Chip stocks overall reversed after Wednesday’s rebound, with the Philadelphia Semiconductor Index down 2.5%, wiping out Wednesday’s gains. Nvidia rival AMD closed down about 3.6%, Broadcom fell about 3.4%, but memory chip stocks stayed in the green: Seagate Technology up nearly 5.9%, SanDisk up 5.2%, Western Digital up 3.8%, and Micron Technology up nearly 0.9%.

Chip equipment leader Applied Materials posted relatively optimistic earnings guidance after hours, and its shares, which fell over 3% during regular trading, soared more than 10% after hours. This shows the AI capital expenditure chain has not collapsed entirely, but there is clear differentiation within the sector.

Tom Essaye, founder of The Sevens Report and former NYSE floor trader, commented: “This is the most uncertain outlook for AI- and technology-driven rallies since this bull market began. It doesn’t mean tech stocks won’t recover as they have before. However, I do want to remind everyone not to just regard this weakness as ‘yet another bump in the road.’”

Dennis DeBusschere, chief market strategist at 22V Research, pointed out: “Right now there’s more bad news about AI disruption than there is good news about AI implementation and profit margins.” He believes the day’s market action was a broad deleveraging.

Market Psychology Reverses, Investors Turn to Searching for Losers

Investor attitudes towards AI have fundamentally shifted, from seeking beneficiaries to identifying potential victims.

Steve Sosnick, chief strategist at Interactive Brokers, said that in recent weeks, especially the past few days, the market appears “riddled with AI traps.” He pointed out that software, insurance brokerages, wealth management and real estate brokerages have seen share prices hit due to fears AI’s advances will harm their business models.

As Sosnick sees it, such steep price declines prove that the momentum-driven market can overreact to both good and bad news. It also demonstrates a major change in market sentiment.

Sosnick said:

“For the past three years, investors have mostly been optimistic about AI. They focused on ‘how can AI improve the efficiency of companies or industries?’ Now, they seem to be thinking ‘how will AI disrupt the profitability of companies or industries?’—investors are no longer looking for winners, but searching for potential losers.”

Adam Crisafulli, founder of Vital Knowledge, remarked: “AI may well be driving economic growth through massive capital investment and productivity gains, but it’s becoming a net negative for stocks.” He noted AI is “destroying” traditional industrial stocks.

Yardeni Research strategists wrote in a report: “From AI-phoria to AI-phobia. For those who experienced the advent of the internet, this feels ‘déjà vu.’ Both AI and the internet are technological disruptions capable of changing nearly everyone’s behavior.”

Real Estate Services Hit Hard, Analysts Say Market Overreacted

Commercial real estate service companies have become the latest sector hit by AI anxiety this week.

CBRE, Jones Lang LaSalle, and Cushman & Wakefield shares dropped sharply on Wednesday and Thursday, cumulatively losing more than 25%. Market fears that AI could automate research, pricing analysis, and transaction sourcing, shrinking brokerage commissions and reducing the need for large consulting teams.

Keefe Bruyette & Woods said in a Thursday report: “The scale of this week’s market drop seems disproportionate to the near-term earnings risk.” The firm noted fears that new technologies will squeeze brokerage and other services have failed to materialize many times before.

CBRE reported record fourth-quarter revenue and double-digit earnings growth Thursday, but AI concerns dominated its earnings call.

CBRE CEO Bob Sulentic acknowledged automation may streamline some valuation and assessment work, but he believes AI will empower rather than replace brokers. The company expects cost savings in research and data acquisition. Sulentic stated: “The core of our work—strategic thinking, creativity, interpersonal relationships—can’t be replaced by AI in the short term.”

Transportation Stocks Join Declines, Apple Hits Second-Largest Market Cap Loss

Several non-tech sectors were also not spared; transportation stocks and Apple were hit hard.

The Dow Jones Transportation Index moved lower, with shares in CH Robinson, Landstar, and Expeditors International plummeting. As previously reported by Wallstreetcn, AI tech company Algorhythm Holdings launched a new platform, putting truck transport companies in the spotlight as the newest targets of investor worries about AI disruption.

Scott Helfstein, Global X head of investment strategy, stated: “The employment report shows weak hiring in transportation. Combined with potential disruption from automation and risk from weakened demand.”

Apple shares fell 5% in one day, more than twice the decline of the Nasdaq, evaporating about $202 billion in market value—its second-largest single-day loss since the late 1980s when it went public.

Commentaries attribute Apple’s sharp drop to two main drivers: first, reports Wednesday that Apple’s highly anticipated Siri AI update has been delayed until May, or possibly September; second, Apple News is facing US Federal Trade Commission (FTC) scrutiny for political bias.

FTC chair Andrew Ferguson sent a letter Wednesday to Apple CEO Tim Cook, asking for a review of Apple News’s service terms and content moderation policy, citing recent “reports” that Apple News promotes left-leaning media while suppressing conservative content.

In addition, Apple faces cost pressures, as flash memory suppliers signal price increases, potentially raising storage costs for Apple hardware and compressing profit margins.

As the AI narrative wavers, Apple—a key index heavyweight—has amplified the index’s overall decline.

Ed Yardeni, president of Yardeni Research, commented: “Investors are extremely nervous about AI’s impact, whether good or bad. Now, they are focused on its disruptive side.”

The market awaits Friday's US Consumer Price Index (CPI) report for January, which is expected to show year-over-year CPI growth slowing to 2.5%. Traders still see little chance of a Fed rate cut in March, with a July rate cut fully priced in.

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