Tech set to still sway US stock market’s course despite AI-driven swoon

Even with the steep pullback in AI names, the US stock market is poised to rely on the performance of technology shares — and investors are on guard for obstacles that could trip up the trade in the coming weeks.

A month-long swoon in technology and AI-related ​stocks culminated last week in the biggest one-day drop for the S&P 500 technology sector in over six years. Investors are concerned Democratic victories in the midterm elections would lead to slower data-center spending that has ‌been at the heart of the market’s rally.

Yet even ‌with the drop, tech remains by far the biggest sector in the S&P 500, the benchmark index for the US stock market. Although its sway has diminished modestly, the tech sector still held a greater than 35% weight in the S&P 500 as of Thursday’s close.

“Because so much of technology is AI-sensitive, it’s going to have an ​impact on the entire sector, and that sector carries so much weight within the S&P 500,” said Robert Pavlik, senior portfolio manager at Dakota Wealth Management. “So weakness in AI is going to drag down tech, which drags down the S&P 500.”a

The sector’s percentage of S&P 500 market capitalization remains above the level it reached during the height of the Internet bubble era in 2000.

The tech sector alone does not fully capture AI’s influence. For example, ​three hyperscalers spending massively on data centers — Alphabet, Amazon and Meta Platforms — are classified in other sectors.

The continued heavy weighting of technology is a byproduct of the huge gains for the sector during the US stock bull market that began in October 2022. Even with ​the tech sector’s latest slide, it has gained more than 200% over that period, nearly double the S&P 500’s gain.

Some of the biggest AI winners are still ​logging significant year-to-date gains despite their recent slides. For example, shares of Sandisk remained up about 250% in 2026, while Dell Technologies was last up about 160% and Micron Technology had gained 140%.

As stocks rebounded somewhat on Friday, the S&P 500 was last up nearly 8% for the year, with the tech sector up about 11%.

“If somebody is in a profit-taking mode, there are still profits to be had,” said Chuck Carlson, CEO at Horizon Investment Services.

The slide in tech has also made valuations for the stocks appear — at least on the surface — more modest. The tech sector’s forward price-to-earnings ratio — based on earnings estimates for the next 12 months — fell to 17.1 as of Thursday, according to LSEG Datastream, after it rose above 32 in October 2025.