Tech Stocks Continue Decline Amid AI Concerns and Weakening Labor Market
US stocks fell on Thursday, extending a recent period of volatility as investors grappled with ongoing anxieties surrounding artificial intelligence and newly released economic data indicating a softening labor market. The Nasdaq Composite experienced its third consecutive day of losses, putting it on track for its worst weekly performance since last April.
The Nasdaq Composite fell 1.26% on Thursday, while the S&P 500 also declined by 1.04%. The Dow Jones Industrial Average was down 1.04%, falling 514 points. This follows a Wednesday where the S&P 500 slid about 0.5% and the Nasdaq Composite fell over 1.5%, continuing a downward trend from Tuesday.
Adding to market concerns, a report from Challenger, Gray & Christmas showed that US job cuts jumped in January, marking the worst start to a year since 2009. This data, combined with December figures revealing the lowest level of US job openings in over five years, fueled worries about economic growth in 2026.
The software sector has been particularly hard hit, with an exchange-traded fund tracking the industry down 3.6% on Thursday alone, marking its eighth consecutive trading day of declines. The release of new AI tools by Anthropic last week has intensified fears that AI will disrupt the software industry, impacting revenue streams and potentially reducing the need for coders.
Several major tech companies experienced significant declines. Nvidia fell over 3% on Wednesday, and nearly 2% ahead of earnings reveals. Microsoft shares were down 3.2% on Thursday. Amazon lost 4.1% and Tesla sank 1.5%. Even positive earnings reports haven’t been enough to reassure investors unless companies can demonstrate how AI will positively impact their businesses, according to JPMorgan.
Alphabet, despite reporting strong quarterly earnings, saw its stock price fall 2.4% as its plans to significantly increase capital expenditure – potentially reaching $185 billion – raised questions about the timeline for returns on its AI investments.
The impact of AI concerns extended beyond tech companies, affecting private credit firms with exposure to the software sector. Shares of Blue Owl sank 5% on Thursday, hitting their lowest level since 2023, and have now fallen for 11 consecutive trading sessions. Ares also experienced a significant drop, falling 12.3% after reporting earnings.
Market volatility increased, with the Vix – often referred to as Wall Street’s “fear gauge” – reaching its highest level since late November. Investors responded by shifting towards safer assets, driving down the two-year Treasury yield to its lowest point in a month, falling 0.07 percentage points to 3.49%.
Advanced Micro Devices (AMD) shares plummeted as the chipmaker’s weak sales outlook cast doubt on its ability to compete with Nvidia in the AI market. Qualcomm also experienced a significant decline, falling 7.6% after signaling that a shortage of memory chips could limit smartphone production.
The Nasdaq Composite is now down almost 6% since reaching a record high in October.
