U.S. stocks moved notably lower on Wednesday, driven by a fresh round of selling in technology shares that extended beyond software into chips and memory.
Software companies came under heavy pressure in the opening hour of trading, marking a continuation of a recent downward trend. Although a number of names recovered some ground from intraday lows, market participants said those rebounds looked more consistent with short covering than with a return of broad investor confidence.
As the session progressed, the weakness appeared to broaden into parts of the market that had been relatively resilient in recent weeks - notably semiconductors and memory producers. The NASDAQ Composite fell 2.2% as losses accelerated in the tech-heavy index.
Individual movers included Advanced Micro Devices Inc, whose shares plunged as much as 17% during the day. Micron Technology, which has been regarded as an AI beneficiary, nonetheless saw its stock decline by nearly 13%.
Market commentary has increasingly centered on the question of whether the rapid evolution of artificial intelligence is serving as a catalyst for growth across technology, or whether it is instead creating structural disruptions that undermine parts of the ecosystem. Adam Crisafulli of Vital Knowledge said: "AI is increasingly becoming a net negative for the market," pointing to competitive disruptions that have unsettled software firms in recent months. He added that recent attempts at bargain hunting have been overwhelmed by what he described as a "tsunami of negativity" sweeping the sector.
Analyst views echoed a cautious stance. JPMorgan analyst Toby Ogg said the industry has moved into a posture where companies are effectively being treated as "guilty until proven innocent," with investors penalizing stocks ahead of earnings reports that might otherwise provide reassurance.
All eyes are now on Alphabet, which is scheduled to report results after the closing bell Wednesday. Crisafulli noted that sentiment toward the company is "(justifiably) very bullish as the company’s core advertising businesses continue to perform very well while it emerges as the best positioned firm in the entire AI ecosystem (no one else has capital, infrastructure at scale, and proprietary frontier technology all under one roof)."
Alphabet's Q4 results could play a pivotal role in determining whether the most recent wave of selling stabilizes or intensifies, as confidence in an AI-driven growth narrative for the broader technology sector continues to be tested.
Market context and implications
- Software-led selling in the opening session set the tone for the day, with limited evidence so far of a durable rebound.
- Semiconductor and memory stocks, which had been relatively steady, are now sharing in the sectorwide weakness.
- Upcoming corporate results, notably Alphabet's quarterly report, are being watched closely for signals that could influence sentiment across the tech complex.