Markets were rattled this week as hundreds of billions of dollars were erased across tech stocks, bonds, and loans in just two days. Software stocks took the biggest hit, with a key ETF losing nearly $1 trillion in value in a single week.
What’s driving the selloff
This is not about an AI bubble bursting. Instead, markets are reacting to the idea that AI could start replacing existing business models much faster than expected. The concern is no longer theoretical. Investors are beginning to price in real operational disruption.
What set it off
The immediate trigger was a new legal tool launched by AI startup Anthropic. On its own, the product was modest. But it reinforced a broader fear that AI is moving beyond experimentation and into roles like legal, sales, marketing, and finance.
Even AI leaders felt the pressure
- Alphabet warned that AI spending will be higher than anticipated
- Arm issued a revenue outlook that missed expectations
- Stocks long seen as AI beneficiaries also sold off
This raised questions about whether rising costs and competition could weigh on future returns.
This isn’t just a US story
- Tech stocks in the UK, India, and across Asia declined
- More than $17 billion in tech-related loans are now trading at distressed levels
The bigger picture
Markets appear to be entering a phase where AI adoption creates clear winners and losers. This selloff looks less like panic and more like an early repositioning as investors reassess which companies can adapt and which may struggle in an AI-first world.