Wall Street sinks as tech rout deepens on AI angst

Wall Street’s main indexes reversed sharply on ⁠Thursday ⁠as investors intensified their selloff of technology shares and ⁠fled transport stocks amid worries about artificial intelligence disruption, while they digested the latest labor market data and awaited ​a key inflation report.

After starting the day higher, equity indexes turned negative in morning trading and losses deepened as investors sought safer investments. 

At a time when investors have been ‌stressed out about the impact AI would have ‌on competition, a less-than-impressive quarterly update from Cisco Systems’ soured the market on technology stocks broadly. Transportation companies also got caught up in worries about AI disruption. 

“The broader ⁠narrative within the market ⁠is what sectors and industries can increase productivity from AI investments, and on the flip side, ​what industries are going to be disrupted by AI,” said Jack Herr, primary investment analyst at GuideStone Funds.

“We see this as a ‘prove it’ year for AI. We need to start seeing some return on investments.”

INVESTORS AWAIT INFLATION REPORT, PARSE JOBLESS DATA

After Wednesday’s stronger-than-expected jobs report fueled worries the Federal Reserve could now be less likely to cut rates, investors braced for the ​January Consumer Price Index report, due on Friday.

Thursday’s data showed the number of Americans filing new applications for unemployment benefits decreased by less than ⁠expected last ⁠week, likely as disruptions from winter ⁠storms lingered.

“We’re in that in-between ​zone between two key economic macro reports,” said Marc Dizard, chief investment officer at Huntington Wealth Management. He added the market is also contending ​with concerns about the impact of AI on ⁠companies such as Cisco.

Cisco shares slumped 11%, making it one of the biggest drags on the S&P 500 after the networking equipment provider posted quarterly adjusted gross margin below estimates.

At 2:29 p.m. ET (1929 GMT), the Dow Jones Industrial Average fell 482.69 points, or 0.96%, to 49,638.21, the S&P 500 lost 80.93 points, or 1.17%, to 6,860.54 and the Nasdaq Composite was down 389.25 points, or 1.69%, to 22,675.88. 

The S&P 500 software index was down 1%, giving up much of its gains since bouncing back from last week’s drubbing. Its ⁠biggest percentage decliner was AppLovin, whose shares fell 18% after it reported fourth-quarter results. The marketing platform has lost nearly ⁠a third of its value in the first six weeks of the year due to intense competition.

The Dow Jones Transport Average lost 4.5%, with CH Robinson and Landstar tumbling about 19% while Expeditors International fell 14%. J.B. Hunt Transport lost 5.5%.

CNBC reported that a new tool from AI company Algorhythm Holdings made trucking companies the latest target of investor worries about AI disruption.

The Philadelphia SE Semiconductor index was down 1.6%, and all Magnificent 7 stocks declined, with Apple and Amazon.com representing the biggest drags on the S&P 500.