Panic Spreads As Selling Begets More Selling

Heightened anxiety within the technology sector has triggered a cascading market reaction, as investor sentiment toward artificial intelligence and its disruptive implications has shifted markedly, amplifying volatility. The initial wave of selling in software equities has rapidly extended to semiconductor manufacturers and large technology names, creating self‑reinforcing selling pressure that has spilled into global stock markets, cryptocurrencies and commodity markets.

Recent trading activity identified the semiconductor space as particularly hard hit, with AMD shares plunging 17% and Palantir declining 12%. Concurrently, Alphabet disclosed plans to double capital expenditures this year to an estimated USD 175 billion–USD 185 billion, a figure more than 50% above analyst expectations; the aggressive spending outlook prompted concerns about return prospects and drove the stock sharply lower in pre‑market trading before losses narrowed, with shares remaining in negative territory.

The contagion effect accelerated overnight into Asian markets. In response to the steep sell‑off in U.S. chip stocks, South Korea’s Kospi Index retreated by nearly 4%. Volatility extended beyond equities: Bitcoin fell below USD 70,000 for the first time since the 2024 U.S. election, representing a decline of more than 40% from its October peak. Precious metals experienced acute swings as well, with silver tumbling as much as 17% intraday and finishing the session down roughly 10%.

Investor attitudes have undergone a substantive reversal, with AI increasingly viewed as a potential threat to incumbent business models rather than an unalloyed positive catalyst. That reassessment contributed to an almost USD 1 trillion erosion in software sector market capitalization over the course of a week. As panic intensified, a negative feedback loop of selling triggering further selling emerged, and market attention shifted toward upcoming corporate and policy events, notably Amazon’s earnings report and imminent decisions from the European Central Bank and the Bank of England.

This week’s price action also reflects a broader sector rotation. While growth‑oriented technology names suffered heavy outflows, the S&P 500 Value Index extended gains for a fifth consecutive session even as the Growth Index declined; the equal‑weighted S&P 500 rose 0.8%, indicating a reallocation of capital toward more cyclical exposures amid improving ISM services and manufacturing survey readings.

Alphabet’s substantial capital‑spending plan, intended to alleviate compute constraints and preserve competitive positioning in AI, nevertheless heightened investor skepticism about the ability of such large investments by hyperscale firms to generate commensurate returns. The market reaction was evident in after‑hours trading, where Alphabet shares fell about 2%.

Macroeconomic indicators presented a mixed picture. ISM data offered signs of resilience, but ADP private‑sector employment growth came in below expectations, underscoring continued weakness in hiring. Market participants are closely monitoring forthcoming job‑openings and initial‑claims data, while also preparing for Amazon’s quarterly results after the close, which will serve as an important barometer of earnings momentum among major technology companies.