Stock prices have soared to record levels, largely due to expectations and hype surrounding artificial intelligence.
But in recent months, concerns about aggressive spending on AI have spread on Wall Street, leaving investors questioning whether the spending will lead to real returns. And this week, rising tech fears spooked some industries, highlighting how quickly sentiment has shifted since the start of the year.
Visa, Mastercard and IBM fell sharply on Monday, leading to broader volatility across AI stocks. Tuesday saw a modest rebound across the market, with some software stocks also rebounding thanks to new AI integrations announced by Anthropic. The benchmark S&P 500 index has remained roughly flat for the year.
Since November, AI-powered coding systems like Anthropic’s Claude Code and OpenAI’s Codex have rapidly grown in functionality and popularity among software developers. These tools allow you to develop complex software packages and products in minutes or days.
The latest decline comes after a grim and now viral Substack post from Citorini Research over the weekend warned of an eventual stock market crash, sharp decline in consumer spending, and widespread white-collar layoffs by 2028 as a result of AI.
Payment companies like MasterCard and American Express were particularly hard hit as traders cut back on spending and looked to the future. Both companies were mentioned in Citrini’s post as potential victims of the AI rush.
Mr. Citrini has published analysis on AI for years, but Sunday’s post stood out for its complex and dramatic depiction of a world where unemployment is widespread and economic activity is declining.
On Monday, IBM suffered its worst one-day decline since October 2000, at the height of the dot-com boom and recession. Some of the pressure came after Anthropic announced midday that its Claude Code tool could be used to update IBM’s prized legacy computing language. Investors saw this development as a potential threat to the maintenance and modernization efforts that underpin IBM’s traditional business. Shares of other consulting and professional services firms, Accenture and Cognizant Technologies, also fell in unison.
The weakness in these individual stocks spread to the entire market. All three major indexes fell on Monday, led by the Dow Jones Industrial Average, which fell more than 800 points. Five of the S&P 500’s 11 sectors also closed in the red, with Financials and Consumer Discretionary leading the way, down 3.3% and 2.2%, respectively.
It’s an irony not lost on Wall Street. The same forces that drove the tech sector’s explosive profits over the past two years are now holding investors back.
Mona Mahajan, head of investment strategy and asset allocation at Edward Jones, said investors are rapidly withdrawing money from sectors deemed vulnerable to disruption by AI, such as financial services, real estate, transportation and logistics. He noted that despite the sharp fluctuations in stock prices, the underlying business itself has not changed significantly, highlighting the speculative nature of much of the reaction.
Monday’s decline was particularly noticeable in the consumer staples sector, home to companies like Walmart and Coca-Cola, where investors are plowing money into solid businesses that are less likely to be disrupted by AI.
While Anthropic and OpenAI have seen their valuations soar over the past year, investors across industries from logistics and trucking to legal services are waking up to the fact that competitors’ traditional barriers to entry may soon be erased by AI’s coding capabilities.
Melissa Otto, director of visible alpha research at S&P Global, told NBC News that increased capital spending around AI and recent advances in the field are threatening many existing business models.
“I think we’re starting to question how software companies are actually going to compete and do better in this environment,” Otto said, emphasizing that companies with more complex workflows and proprietary data repositories are more likely to withstand the coming AI storm. “The data underlying generative AI is predictive and unique and can give businesses a real advantage.”
Beyond AI, the market is also grappling with growing fears of war between the US and Iran and legal whiplash over President Donald Trump’s now-defunct emergency tariffs. Still, some Wall Street analysts argue that recent trade developments could provide a constructive distraction for U.S. markets in the short term.
“Investors are reflecting on a number of concerns about AI in early 2026, including cash flow, capital spending levels, and whether various industries will survive the AI era,” Lori Calvasina, head of U.S. equity strategy research at RBC Capital Markets, said in a note to clients on Monday.
“We generally believe that the existential concerns for non-software industries such as asset management and transportation and logistics are overblown, and think it is healthy for the equity community to focus on other topics for the time being.”
