A fresh wave of AI-disruption anxiety hit software shares, pushing investors toward “old economy” winners even as rates and inflation data kept policy bets in check.
Global equities traded with a risk-off undertone Wednesday after a selloff in software and information-services names spread across regions, driven by fears that rapidly improving AI tools could erode pricing power for incumbent platforms. The move extended a rough patch for parts of tech after Tuesday’s slide, and it reinforced a familiar early-year pattern: when megatrends wobble, positioning unwinds fast and leadership narrows.
In the U.S., premarket action pointed to a choppy open: Advanced Micro Devices (AMD) fell sharply after earnings despite upbeat guidance, while Super Micro Computer (SMCI) jumped on results and Enphase Energy (ENPH) surged on a stronger outlook—an illustration of how stock-specific fundamentals are overwhelming broad sector narratives this week. Traders also kept a close eye on Alphabet (GOOGL) ahead of results, with cloud and AI spending commentary likely to shape sentiment for the wider complex.
Europe offered a split screen. The UK’s FTSE 100 pushed to record territory, helped by an $8 billion-equivalent insurance deal and a continued tilt toward financials and cyclicals that are seen as less exposed to AI-driven margin risk. On the continent, investors weighed a notably softer inflation print: eurozone headline inflation fell below the European Central Bank’s 2% target, but markets were still cautious about pricing aggressive easing this year.
Rates remained a key cross-asset signal. The U.S. 10-year Treasury yield hovered around the mid-4% range, keeping equity valuation debates alive—especially for long-duration growth stocks where discount-rate sensitivity is highest. For now, the message from price action is pragmatic: investors are demanding clearer earnings durability from software, while rewarding hardware, energy transition, and select industrial exposures where demand visibility looks firmer.
For broad-market investors, the tug-of-war sets up a near-term test for the SPDR S&P 500 ETF Trust (SPY): either earnings breadth improves enough to absorb tech volatility, or the market’s advance leans more heavily on defensives, dividends, and deal-driven single-stock stories.
