US stocks faced significant declines on Wednesday as Wall Street grappled with a new wave of earnings reports and anticipated results from Alphabet, closely scrutinizing the impact of artificial intelligence (AI) on software and technology sectors. The S&P 500 fell over 1%, while the Nasdaq Composite dropped more than 2%, continuing the downward trend from Tuesday. In contrast, the Dow Jones Industrial Average managed to tick higher, reflecting a shift away from tech stocks towards blue-chip names.
The market is struggling to regain its footing amid fears that AI disruptions will exacerbate vulnerability in software stocks, leading to a global sell-off that has also affected European and Asian markets. This broader cloud of uncertainty surrounding AI technology has initiated a capital rotation from high-profile tech stocks to value investments, with major companies facing the brunt of the impact. Notable declines included Nvidia, which dropped over 4%, and Google, which fell nearly 3% ahead of its earnings report. Amazon and Tesla also saw significant losses, down over 2% and more than 5%, respectively.
Even strong earnings reports are failing to reassure investors, as JPMorgan cautioned that companies must demonstrate that AI will serve as a tailwind for growth instead of a burden. Advanced Micro Devices witnessed a significant plunge in its stock following a subdued sales forecast, intensifying doubts about its competitive standing against AI leader Nvidia.
In the labor market, an ADP report indicated that only 22,000 jobs were added in January, starkly lower than the anticipated 45,000. With private job data gaining prominence due to delays in federal jobs reports stemming from a recent government shutdown, eyes are on the official jobs report scheduled for the following Wednesday.
Meanwhile, gold prices fluctuated due to tensions between the US and Iran but ultimately fell below $5,000 an ounce after a substantial decline. The cryptocurrency market also faced pressure, with Bitcoin losses accumulating, trading near $72,000.
In the corporate landscape, pharmaceutical company Eli Lilly saw its stock surge after projecting a strong profit forecast, buoyed by the soaring demand for weight-loss drugs. Conversely, its competitor Novo Nordisk faced a severe drop in stock value following a sobering sales outlook, resulting in a staggering loss of approximately $50 billion in market capitalization since early February.
Bank of America economists predicted that US economic growth could be “front-loaded” in 2026, with expectations for stronger growth in the first half of the year compared to a more moderate pace later. This perspective starkly contrasts with consensus forecasts, which suggest steady growth throughout the year.
On the cryptocurrency front, Bitcoin experienced a decline of over 4% following comments from Treasury Secretary Scott Bessent, who indicated that the government would not intervene to support cryptocurrencies. This sentiment contributed to Bitcoin’s recent downturn, with the currency now down about 13% in the last five days.
Disappointment continued in the software sector as a wave of sell-offs persisted, with major companies experiencing notable losses. Investors remain skeptical about the future of software stocks, driven by fear of AI displacement.
In other corporate updates, Eaton Corporation reported a dramatic increase in data center orders, while Silicon Laboratories saw its stock surge following news of its acquisition by Texas Instruments. Eli Lilly’s positive forecasting contrasted sharply with the challenges faced by its rival Novo Nordisk, reflecting the volatility in the pharmaceutical industry.
Overall, the US stock market is navigating a complex landscape characterized by AI-related anxieties, a cautious labor market, and diverging fortunes among major corporations. Investors are closely watching forthcoming earnings reports and economic indicators for clearer direction amid the turmoil.
