U.S. stock markets fell sharply on Wednesday, led by another aggressive selloff in technology shares as pressure intensified across both software and semiconductor stocks.
Software names were hit hard early in the session, extending a downturn that has dominated recent trading. Although some stocks staged modest rebounds from intraday lows, traders said the move appeared driven more by short covering than renewed investor confidence.
James Reilly, senior markets economist at Capital Economics, said the recent declines do not signal fading enthusiasm for artificial intelligence. He noted that investors are likely to continue viewing AI as a net positive over time, with long-term benefits expected to outweigh short-term disruptions and support equity markets later this year.
However, selling pressure began rotating into chipmakers and memory stocks—segments that had held up relatively well in recent weeks. The tech-heavy NASDAQ Composite slid 2.2%, with losses accelerating as the session progressed. Shares of Advanced Micro Devices plunged as much as 17%, while even perceived AI winners such as Micron Technology saw shares tumble nearly 13%.
Investor anxiety has increasingly focused on whether the rapid pace of AI development is disrupting large parts of the technology ecosystem rather than lifting it. Adam Crisafulli of Vital Knowledge said artificial intelligence is becoming a growing drag on market sentiment, as competitive pressures continue to unsettle software companies.
“AI is increasingly becoming a net negative for the market,” Crisafulli said, adding that recent bargain hunting has been overwhelmed by what he described as a wave of negativity sweeping the sector.
A similarly cautious view was echoed by JPMorgan analyst Toby Ogg, who said the industry has shifted into an environment where companies are effectively “guilty until proven innocent,” with investors selling first and waiting for earnings to provide reassurance later.
Attention now turns to earnings from Alphabet, due after the closing bell. Crisafulli said sentiment around the company remains constructive, citing the strength of its core advertising business and its positioning within the AI ecosystem, supported by scale, infrastructure, and proprietary technology.
Alphabet’s quarterly results could prove pivotal in determining whether the latest wave of selling stabilizes or deepens, as investors reassess confidence in AI-driven growth amid ongoing volatility across the technology sector.
