Panic is spreading, and selling is triggering more selling.

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Anxiety in the technology sector is triggering a chain reaction, with investors reversing their views on artificial intelligence and its disruptive impact, significantly increasing market volatility. Against this backdrop, a wave of sell-offs in the software industry has rapidly spread to chipmakers and major tech stocks, resulting in self-reinforcing selling pressure, which further affects global stock markets, cryptocurrencies, and commodities.

Recent trading shows that the chip industry has been hit hard, with AMD shares plunging 17% and Palantir dropping 12%. Meanwhile, Alphabet announced that its capital expenditures this year will double, more than 50% above analysts' estimates. This aggressive spending plan sparked concerns about Alphabet’s return prospects, causing its share price to fall sharply before the open. Although losses later narrowed, the stock remained in the red.

This sell-off is highly contagious, sweeping through Asian markets overnight. Affected by the plunge in Wall Street chip stocks, South Korea’s Kospi Index fell nearly 4%. Meanwhile, the volatility is not limited to equities: Bitcoin fell below $70,000 for the first time since the 2024 U.S. election, down more than 40% from the peak in October last year; the precious metals market was also turbulent, with silver prices plummeting as much as 17% and intraday losses holding around 10%.

Market sentiment is undergoing a profound shift, as investors no longer see AI development as a universally positive factor but are starting to assess the threats it poses to existing business models. This change has wiped nearly $1 trillion from the software sector’s market value in just one week. As panic intensifies, a negative feedback loop of selling triggering more selling is forming, and market focus has now turned to Amazon's upcoming earnings report and policy decisions from the European Central Bank and the Bank of England.

AI Narrative Reversal and Tech Stock Rotation

This week’s market action paints a grim picture: investor sentiment toward AI has shifted from unconditional optimism to caution. The potential threat AI poses to existing businesses has directly hit software stocks, and this anxiety has spread to the hardware manufacturing sector.

This volatility also mirrors the sector rotation seen this year. As tech growth stocks have come under pressure, the S&P 500 value index rose for a fifth consecutive session on Wednesday, while the growth index fell. The equal-weighted S&P 500 gained 0.8%, reflecting a return of funds to more cyclical stocks amid favorable ISM services and manufacturing survey data.

Massive Capital Expenditures Spark Concerns Over Returns

Alphabet’s capital spending outlook, disclosed Wednesday, unsettled the market. The company projects capital expenditures this year could reach $175–185 billion, doubling previous levels. This aggressive move aims to ease computing bottlenecks and maintain a lead in the AI race.

However, the market’s reaction was subdued, with Alphabet shares falling 2% in after-hours trading. This isn’t the first time investors have been unnerved by so-called “hyperscalers” making huge AI investments. The main source of market anxiety is whether such massive inputs can translate into substantial returns.

Macroeconomic Signals and Policy Focus

Beyond tech stock turmoil, macroeconomic data was mixed. While ISM data offered positive signals, ADP private sector job growth fell short of expectations, indicating that hiring activity remains sluggish. The market is now closely watching today’s JOLTS job openings data and initial jobless claims.

Additionally, investors are bracing for Amazon’s earnings after the close—a key moment to assess the performance of tech giants.

Risk Disclosure and DisclaimerThe market carries risks; investments should be made cautiously. This article does not constitute personal investment advice and does not consider any individual user’s specific investment goals, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article fit their specific circumstances. Investing accordingly is at your own risk. ```