Stocks plunge on AI spending fears as tech rout on Wall Street deepens

• The Dow fell nearly 400 points (0.8%), the S&P 500 dropped 0.9%, and the Nasdaq declined 230 points (1%), with tech mega-caps Microsoft and Tesla falling 3.4% and 3.7% respectively
• The S&P 500 software and services index dropped 3.2% for its seventh straight negative session, erasing roughly $830 billion in market value since January 28 as investors worry AI tools could erode demand for traditional software
• Market rotation accelerated out of expensive AI stocks into small-caps, value stocks, and mid-caps, with the CBOE volatility index rising to 20.49, its highest level in over two months

Market Summary: Tech Sector Selloff Deepens on AI Spending Concerns

Key Market Movements:

U.S. markets tumbled Thursday, with the Dow Jones falling nearly 400 points (0.8%) to 49,113, the S&P 500 declining 0.9%, and the Nasdaq dropping 230 points (1%). The Nasdaq hit its lowest level in over two months, while the S&P 500 reached a two-week low.

Primary Catalysts:

Alphabet triggered the selloff by announcing plans to double capital expenditure this year for AI infrastructure buildout. Qualcomm's weak forecast, with second-quarter revenue and profit below estimates, sent its shares down 8.2% and intensified concerns about AI spending returns.

Companies and Sectors Affected:

• Tech mega-caps suffered widespread losses: Microsoft (-3.4%), Tesla (-3.7%), Amazon (-4.3%)
• Software stocks hit hardest: ServiceNow (-5%), Salesforce (-4%)
• The S&P 500 software and services index fell 3.2% for its seventh consecutive negative session, erasing approximately $830 billion in market value since January 28

Market Implications:

Investors are questioning when Big Tech's collective $500 billion AI investment this year will generate returns, particularly as AI tools threaten traditional software demand. The CBOE volatility index surged 3.8 points to 20.49, a two-month high.

A notable rotation is underway, with capital flowing from expensive tech stocks to value plays. Small-cap, mid-cap, and value indices remain on track for weekly gains despite the broader S&P 500 decline exceeding 2%.

Additional Data:

Silver plunged nearly 13%, Bitcoin dropped below $70,000, and unemployment claims exceeded expectations. Consumer staples was the only defensive sector trading positively.