Markets Tumble as AI Anxiety Sparks Broad Deleveraging

Markets sold off sharply Thursday as mounting fears over AI-driven disruption triggered a shift in sentiment, leading to a broad-based risk-off move. Tech stocks led the decline, with the Nasdaq 100 falling 2% and the S&P 500 down 1.6%, marking the steepest drop in over three weeks. Safe havens like Treasuries caught a strong bid, while gold, silver, and Bitcoin were hit by forced selling. The selloff comes ahead of Friday's key inflation data, adding to investor anxiety.

Key Headlines & Market Movers:

• AI Disruption Sparks Tech-Led Selloff: A growing chorus of concerns over AI's impact on business models, particularly in software, real estate, and financial services, spurred a selloff across mega-cap tech and broader tech indices. The Nasdaq 100 and Magnificent Seven stocks all declined, with Apple sliding 5%. Investors are now increasingly focused on existential risk from AI rather than its productivity upside, shifting from optimism to caution. Cisco tumbled 12% on weak margins, further reflecting pressure in the sector.

Flight to Safety, But Commodities Buckle: Despite a move into Treasuries (10-year yield dropped to 4.10%), traditional safe havens like gold and silver sold off, with silver plunging 11%. Analysts pointed to forced liquidation to cover equity losses. Oil also slid 2.6%, further weighing on inflation-sensitive trades. Crypto was not spared either: Bitcoin fell to ~$65,000, with weak technicals and fading momentum compounding losses.

• AI Valuations and Funding Spark Market Anxiety: AI startup Anthropic’s $30B raise at a $380B valuation amplified fears of irrational exuberance and triggered a wave of revaluation across adjacent sectors. Companies perceived as vulnerable to AI saw outsized drops. Analysts warn that recent gains driven by AI hype are at risk of unwinding amid rising scrutiny over monetization and capital intensity.

Macro Data Mixed, Rate Path in Focus: Jobless claims ticked up slightly while existing home sales fell below expectations, adding to the cautious tone ahead of CPI data. Markets still see little chance of a Fed rate cut in March, but July remains priced in. Some strategists warn the market is complacent on inflation risks, and with inflation expectations still elevated, upside CPI surprises could rattle rate expectations further.

S&P 500 Sector Performance

Looking Ahead

Friday’s CPI print will be pivotal. Investors are bracing for potential volatility, especially with sentiment fragile and AI news flow driving high dispersion across sectors. While tech valuations are under pressure, the narrative remains fluid: companies leveraging AI effectively may emerge stronger, particularly in financials and health care. For now, portfolio diversification and close monitoring of inflation and rate expectations remain critical.

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