Tech Stocks Slide as AI Concerns Shake Markets

The Magnificent 7 tech giants have dropped 8.7 percent year-to-date, as investor worries over artificial intelligence cast a shadow over strong earnings and a resilient economy. Massive spending to expand AI data centers is raising questions about how long it will take to see a return and whether there’s enough power to run all the new infrastructure. AI promises lower labor costs, but it also creates uncertainty about jobs, which could affect consumer spending.

Software companies are bearing the brunt, down 24.3 percent YTD, as AI tools are increasingly capable of writing the code traditionally handled by humans. Firms that provide databases and analytics, including rating agencies, are also seen as vulnerable to automation. Essentially, any work done primarily on computers is at risk, though the timeline for AI’s full impact remains unclear.

Today, consumer discretionary, technology, and communication services sectors are all under pressure, reflecting broader concerns about spending, rising credit card debt, and falling free cash flow after record capital expenditures. Global tensions are also weighing on markets. The situation in Ukraine and Gaza shows little progress, while the risk of military action in Iran appears to be growing. Domestically, investors await the Supreme Court’s decision on Trump-era tariffs, and a potential government shutdown remains a concern over ICE funding disputes.

Interest rates remain moderate, with the U.S. two-year at 3.43 percent and the 10-year at 4.05 percent. Softer inflation is offset by strong labor numbers, pushing expectations for Fed rate cuts further out, likely after Jerome Powell steps down in May. Volatility is high, but fundamentals are solid, with GDP projected to reach 6 percent in 2026. Many analysts view current swings as a potential buying opportunity, though predicting when calm will return is difficult.