Over the past few weeks, investors’ anxiety about AI disruption hit the software sector like a tidal wave—but now, the tsunami is overtaking the rest of the market.

For years, investors have been wooed by AI’s potential to boost productivity, sending the “picks and shovels” stocks of the AI boom to crazy high valuations. But now many are seeing the flip side of that coin: The prospect that AI could spur mass job displacement and completely disrupt entire industries, scaring traders into a mass selloff.

• It all started with the SaaS apocalypse: Earlier this month, software names began to fall after Anthropic released a new AI tool that easily completed many of the functions software providers sell. The S&P 500’s software sector index is down roughly 17.35% over the past month. Names like Snowflake, ServiceNow, Salesforce, and Microsoft got hit particularly hard.
• The next sector to get swept up in fear was financials. Charles Schwab sank 13% from Monday’s close to yesterday after a new AI-driven wealth management tool made waves. The S&P 500 Financials sector fell about 4% yesterday alone.
• Fears that AI would take jobs also hit commercial real estate stocks, for the simple reason that companies would no longer need office space if their workers became bots. CBRE fell 9% on Thursday, while Jones Lang Salle fell 7.6% and Hudson Pacific Properties dropped 4% yesterday.
• It wasn’t just white collar jobs, either: The trucking industry was hit after a company that previously made karaoke machines (yes, seriously) released a new AI tool that could scale freight volumes without increasing headcount. Shares of C.H. Robinson fell 14.5%, while RXO dropped 20.5% yesterday.

Is the fear overblown?

An essay that went viral on X this week argued that soon AI will be able to do pretty much every white collar profession you can think of. But to be clear, not everyone thinks an army of bots is going to be running the entire economy anytime soon. In fact, many analysts think this week’s downturn is a buying opportunity.

“We believe the market is baking in a doomsday scenario for software companies in the near-term, which we believe is extremely overblown, as many customers won’t be willing to put their data at risk to capitalize on AI implementation strategies until there is less risk with these migration projects,” wrote Wedbush analyst Dan Ives in a note yesterday.

Many traders seem to agree: Many of the trucking, financial, and software names that sold off yesterday ended today in the green.

The big picture: We’re still in the early innings of how everything will shake out when it comes to AI. But that isn’t stopping anyone from rushing to conclusions.—LB

🟢 What’s up

• Applied Materials rose 8.08% after topping quarterly earnings and guidance, with its CEO forecasting more than 20% growth in its semiconductor business.
• Roku climbed 8.60% following a strong fourth-quarter report, as analysts lifted price targets on upbeat guidance for the year ahead.
• Rivian gained 26.64% after beating earnings and revenue expectations, even as deliveries fell to 9,745 vehicles amid a 36% drop in US EV sales.
• Moderna advanced 5.29% on a strong Q4, helped by stronger-than-expected US sales of its Covid-19 vaccine.
• Instacart jumped 9.21% after topping revenue estimates and issuing strong guidance, reporting its strongest gross transaction value in three years.
• Coinbase rose 16.46% despite missing earnings expectations, as investors cheered a sharp rebound in free cash flow to $3.07 billion.

What’s down

• Beer maker Constellation Brands fell 8.04% after naming Nicholas Fink as its new CEO.
• Norwegian Cruise Line dropped 7.57% after announcing its own CEO change and receiving a downgrade from JPMorgan, which cited heavier promotions and softer first-quarter net yield growth.
• DraftKings slid 13.51% on a significant fourth-quarter earnings miss and issued cautious guidance for its fiscal 2026.
• Expedia Group declined 6.41% despite beating earnings, as the company flagged emerging AI-powered platforms as a potential competitive risk.
• Pinterest sank 16.83% after its fourth-quarter report detailed tariff-related disruptions and pullbacks in advertising spending from major retailers.

After weeks of subzero weather, even inflation has caught a cold: January’s Consumer Price Index report shows that the cost of goods rose by 2.4% annually. That’s down from 2.7% in December, lower than analyst expectations of 2.5%, and the slowest pace of inflation since May 2025.

Core CPI, which strips out volatile food and energy costs and is considered a better barometer of the overall economy, came in as expected at 2.5%—down from 2.6% in December and the slowest annual increase since March 2021.

This rosy report, which arrived two days late due to a brief government shutdown, has revived hopes that the Federal Reserve may cut interest rates three times this year rather than two after holding rates steady in January. US Treasuries jumped on the news, while the S&P 500 bounced higher after a rough week rattled by AI worries.

CPI’s biggest movers: The main culprits keeping inflation elevated were housing, which rose 3% year over year and accounts for over one-third of CPI. The cost of food also rose by 2.9%, and if you’re craving a burger or a Starbucks frappucino, prepare to cough up over 15% more for beef and 18% more for coffee than you did last year.

Meanwhile, energy costs were all over the map: Gas prices plummeted 7.5% annually, while electricity surged 6.3%, making this week a rare win for gas guzzlers over EVs. Airline fares also soared 6.5% annually, which means that your escape to Aruba may come with some turbulence for your bank statement.—JD

Memory prices are soaring, and you might be the one footing the bill.

The surge is being driven by exploding demand for memory chips as companies race to build massive AI data centers, where servers require enormous amounts of memory to train and run models. As tech giants absorb a growing share of global supply, availability for smartphones, PCs, and gaming consoles shrinks, tightening the market and pushing costs higher for consumer electronics makers.

The cost crunch

At the center of it all are two components: DRAM for multitasking, and NAND flash for storage. Over the past year, contract prices for both have risen about seven times over, forcing manufacturers to absorb higher costs, raise prices, or cut memory.

PC makers are especially exposed, with memory accounting for as much as 30% of total build costs. Dell Technologies has lifted prices on some commercial laptops, Acer is offering models with less RAM, and Lenovo has warned the spike could dampen demand.

Meanwhile, smartphone companies face a similar problem: Apple, Samsung, and Xiaomi have all pointed to a tougher cost backdrop, weighing slimmer margins against trimming memory in new releases.

The squeeze is hitting at a particularly delicate moment, as companies push deeper into AI features that require more memory. It’s shaping up as a real test of which firms can manage the pressure, and which get left behind.

Winners and losers

Since the end of September, a Bloomberg gauge of global consumer electronics companies has fallen 10%, while memory-chip makers have surged, with SK Hynix up more than 150%, Kioxia Holdings and Nanya Technology each climbing over 270%, and Sandisk jumping more than 400%.

“Historically the memory cycle normally lasted 3-4 years,” Jian Shi Cortesi, fund manager at GAM Investment Management, told Bloomberg. “The current cycle already exceeded the previous cycles both in length and magnitude, and we are not seeing demand momentum softening.”

So if your next iPhone costs a little more, you know who to thank.—SY

• Top Goldman Sachs lawyer Kathy Ruemmler is departing the post over her ties with Jeffrey Epstein.
• The Pentagon briefly added Alibaba, Baidu, BYD, and TP-Link to a list of firms that help the Chinese military, before taking the names down a few minutes later without explanation.
• The dollar’s decline has sparked a new trading trend: the “hedge America” trade.
• The average tax refund is up 22% so far this season, according to Treasury Secretary Scott Bessent.
• The Department of Homeland Security is shutting down after Senate Democrats and the White House couldn’t reach an agreement.
• Here’s how the economy’s cognitive dissonance between consumer sentiment and stock prices came to be.

The market’s closed. The money decisions aren’t. Money Unplugged explores how people actually think about money—risk, discipline, and life beyond the portfolio.

It’s a short trading week here in the US thanks to President’s Day on Monday, but that doesn’t mean it’ll be a quiet one.

Monday: Nothing, enjoy some well- deserved rest and relaxation.

Tuesday: It’s a pretty quiet day for economic reports, with just the Empire State Manufacturing Survey to keep an eye on. Earnings from Medtronic, Palo Alto Networks, Cadence Design Systems, EQT, Kenvue, Devon Energy, eToro, and InterContinental Hotels.

Wednesday: We’ve got a delayed look at housing starts and building permits thanks to the last government shutdown, and we’ll get a peek at the minutes from the last FOMC meeting. Earnings from Analog Devices, Booking.com, CRH, Glencore, BAE, Carvana, Occidental Petroleum, DoorDash, Moody's, eBay, Garmin, Global Payments, Figma, Cheesecake Factory, and Wingstop.

Thursday: The usual initial jobless claims report will be paired with US trade deficit data from December. Earnings announcements from the likes of Walmart, Nestlé, Airbus, Rio Tinto, Deere, Newmont, Lemonade, Etsy, Yeti, Opendoor, Dropbox, Live Nation Entertainment, Pernod Ricard, Wayfair, Renault, and Klarna.

Friday: A light day of earnings is balanced by a strong slate of economic reports, including the December PCE reading, an early look at Q4 GDP, a preliminary reading of consumer sentiment, and the S&P flash services and manufacturing PMI reports. Just a handful of earnings announcements worth watching, including Western Union, Anglo American, and Danone.