Nasdaq Index: AI Fears Hit Tech Stocks as US Indices Slide Today – Forecast Analysis

Stocks Plunge as AI Concerns Overshadow Economy and Rate Worries

The major U.S. equity indexes are sharply lower across the board on Thursday as investors shift their focus from the economy and interest rates to a growing list of artificial intelligence concerns. The biggest issue investors have is the expected disruption of business models of entire industries, which could lead to higher unemployment.

Shortly after the mid-session, the blue chip Dow is off by 1.1%. The benchmark S&P 500 Index is down 1.1% and the tech-weighted Nasdaq Composite has shed about 1.5%.

Magnificent Seven Stocks Lead Tech Selloff

Dragging the technology sector lower is a slew of the “Magnificent Seven” stocks including Apple, which is down about 3%. Other include Meta Platforms and Amazon, off by about 2%.

Investors today continue to look beyond just the tech sector too. Software stocks, a key sub-sector of Technology is being driven lower again as fears of artificial intelligence taking over the software space continue to shake-up Wall Street professionals.

Starting with the top dog, iShares Expanded Tech Software Sector ETF (IGV) is down about 3%, putting it at about 32% below its recent high. Pure AI plays like Palantir Technologies (-6%) and Oracle (-2%) are weighing on the Tech Sector.

The makers of networking hardware such as switches and routers aren’t being spared either, for example, Cisco Systems, is down about 11%.

Investors Rotate Into Old Economy Stocks

With investments in technically failing at this time and seemingly at risk in the near future, investors are searching for “old economy” stocks, which feature investments in machinery, financials or energy. Basically, anything that isn’t AI-related or has technology in its name. For example, some investors found cyclical issues like Walmart (+3%) or Boeing (+2%), more attractive. Earlier in this week, the Dow, which has limited exposure to technology, hit a record high over 50,000.

However, can investors really afford to ignore economic data at this time with every report likely to have an impact on Fed policy and the direction of interest rates in 2026. Wednesday, blowout U.S. jobs report may have solidified a June rate cut by the Fed. This may have already been priced into the markets since we saw a limited reaction, but if Friday’s consumer inflation report exceeds the forecast, how are investors going to react? What if suddenly, they have to start pricing in a September rate cut or even further out?

Today’s sell-off may not be all about AI, but also about Fed uncertainty. Therefore, investors have to be prepared for heightened volatility because concerns about AI spending and potential business model disruption is not likely to go away soon, but by this time tomorrow, we may also have a rate cut crisis on our hands.

More Information in our Economic Calendar.