Investing.com — U.S. markets slid sharply lower on Wednesday, led by another violent selloff across technology shares as pressure intensified in both software and semiconductors.
Software stocks were hit hard in the opening hour of trading, extending a rout that has defined recent sessions. While some names bounced modestly from their lows, traders said the early recovery looked more like short covering than a sign of durable confidence.
“We don’t think the falls suffered by software stocks in recent days are indicative of waning enthusiasm for AI. We think investors will continue to judge that the benefits accruing from AI will outweigh the costs, driving the stock market higher this year,” James Reilly, Senior Markets Economist at Capital Economics, wrote on Wednesday.
At the same time, weakness appeared to be rotating deeper into chips and memory — parts of the market that had held up relatively well over recent weeks.
The NASDAQ Composite was down 2.2% on the day as losses in the tech-heavy index accelerated. Shares of Advanced Micro Devices Inc (NASDAQ:AMD) plunged as much as 17%. Even an AI winner Micron Technology (NASDAQ:MU) saw its shares fall nearly 13%.
Market anxiety has increasingly centered on whether the rapid evolution of artificial intelligence is undermining large parts of the tech ecosystem rather than lifting it. Adam Crisafulli of Vital Knowledge said AI has turned into a growing drag on sentiment.
“AI is increasingly becoming a net negative for the market,” he said, pointing to competitive disruptions that have shaken software companies over recent months. He added that recent bargain hunting has been overwhelmed by what he described as a “tsunami of negativity” sweeping the sector.
JPMorgan analyst Toby Ogg struck a similarly bleak tone, saying the industry has shifted into an environment where companies are effectively “guilty until proven innocent,” with investors punishing stocks before earnings can offer any reassurance.
Attention is now turning to upcoming results from Alphabet (NASDAQ:GOOGL), due after the closing bell Wednesday.
“Sentiment is (justifiably) very bullish as the company’s core advertising businesses continue to perform very well while it emerges as the best positioned firm in the entire AI ecosystem (no one else has capital, infrastructure at scale, and proprietary frontier technology all under one roof),” Crisafulli added.
Google’s Q4 report could help determine whether the latest wave of selling stabilizes — or deepens — as confidence in the AI-driven growth story continues to erode.
