Nervous tech investors rocked the markets this week as the tech-heavy Nasdaq index lost more than $1.5 trillion in market value according to CNN and FactSet data. It was the worst 3 days for the index since the major tariff announcements last April.
The primary trigger behind this week’s market selloff was the announcement from AI company Anthropic that its AI tools were being deployed in legal and accounting applications.
This quickly raised fears that AI could soon replace many software tools and services, sending software stocks sharply lower and shedding $830 billion in market valuation in six trading days.
https://abcnews.go.com/Business/new-ai-tool-hammered-software-stocks-week/story?id=129845251
https://www.cnn.com/2026/02/04/investing/us-stocks-anthropic-software
This is a great example of the uncertainty new technology, in this case AI, brings to the markets. Disruptive innovation always creates winners and losers, and the stakes are high to be on the right side of the future. Fear that software companies could soon be net losers triggered a shoot first and ask questions later response by investors this week.
The Nasdaq index is in red, and the broader S&P 500 index is in blue.
Adding to investor concerns was the announcement this week that job openings were down and layoffs were up for January. Additionally, the collapse in the price of Bitcoin, down by over 25% in the past 30 days, could be causing some spillover effect into the equity markets as well.
As of Friday morning, markets were rebounding. All in all, we see this as normal market volatility as the primary tailwinds supporting the economy this year remain intact.
- Tax cuts will result in rising tax refunds early this year, stimulating consumer spending. JP Morgan estimates consumers will receive an extra $50 billion – $100 billion because of the tax cuts.
- Corporate spending (capital expenditures, or Capex) on both AI and non-AI related items is likely to increase due to lower interest rates and accelerated depreciation of equipment from the tax cut act.
- It’s an election year. The party in power typically supports stimulative economic policies in election years to juice the economy (and hopefully markets) leading up to November.
Have a great weekend.
Jack C. Harmon II, CFP®, CIMA
Principal, Harmon Financial Advisors
Registered Principal, Raymond James Financial Services
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