The tech and software sectors faced a significant pullback as investor anxieties mounted over the impact of innovative AI tools. The Nasdaq Composite dropped 2%, leading a broader tech selloff, while the S&P 500 fell 1.6%, and the Dow decreased by 1.3%. Investors are increasingly worried that AI won’t just enhance, but may disrupt traditional software companies, particularly in areas like SaaS and financial tech. As AI demonstrates capabilities like drafting legal documents and coding, many are questioning the necessity of conventional software, resulting in a renewed “sell software” trend. This shift has led to declining valuations and lower expected cash flows, causing high-multiple tech stocks to suffer. Concurrently, worries about heavy capital expenditure on AI by major players like Amazon and Alphabet persist, with their stocks facing downward pressure. Upcoming inflation data may influence further market movements, particularly for growth-oriented tech stocks.
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