AI Shakeout Hits Tech Stocks

The heavyweight technology sector is undergoing an artificial intelligence-driven shakeout, keeping stock investors on edge. Wall Street has been focused on a significant rout in software stocks, raising concerns about how AI will fundamentally alter business models across the industry. This weakness in tech, which holds substantial weight in major U.S. indexes, has caused the S&P 500 to decline, erasing its gains for 2026.

Despite the tech downturn, investors have noted a rotation into other market segments. Energy, consumer staples, and industrials have performed well this year, contrasting with tech's struggles. The S&P 500 software and services index has plunged 17% in just over a week. This fallout highlights investor efforts to identify AI's winners and losers, as concerns grow that accelerated AI adoption could hinder growth for some businesses.

Upcoming economic data, including the January nonfarm payrolls report and the consumer price index, will be closely watched. These reports, delayed by a recent government shutdown, are expected to provide insights into labor market trends and inflation. Market expectations suggest the Federal Reserve will hold interest rates steady until June, potentially with a new Fed chair in place.