A sharp tech selloff has wiped out about $1 trillion from US stocks over recent sessions, cooling Wall Street's AI-driven rally. Leading tech companies and software firms, previously boosted by artificial intelligence excitement, drove the drop, pushing major indexes into the red for 2026. The $1 Trillion Carnage Unfolds Concentrated losses hammered high-flying tech and enterprise software sectors, where sky-high valuations assumed flawless execution. Global software stocks shed nearly $1 trillion as traders grapple with AI's dual role: revolutionary growth driver or disruptor of established revenue streams. Earnings season ignited the firestorm, with Amazon, Microsoft, Alphabet, Meta, Nvidia, and Oracle unveiling eye-watering AI capex commitments totaling hundreds of billions. This Magnificent Seven cohort hemorrhaged over $1 trillion collectively last week alone: Amazon shedding $300 billion in a single stroke. Compounding the pain, January's blockbuster layoff figures, exceeding 100,000 jobs, torched hopes for a gentle economic touchdown, spurring a frantic de-risking frenzy. AI Hype Crashes into Reality Skepticism now reigns: can unprecedented AI infrastructure outlays: forecast at $660 billion yearly translate to near-term earnings before multiples implode? The pendulum swung from chasing AI winners to dodging ”AI casualties,” particularly legacy software firms vulnerable to agentic AI upending their core models. The S&P 500 breached its 50-day moving average, flipping YTD negative and unleashing algorithmic avalanches. Nasdaq endured a dot-com reminiscent drubbing, VIX volatility exploding as this trillion-dollar evaporation exposes the fragility of an AI-saturated market architecture. Should Fed hawkishness intensify or Q1 AI results falter, deeper equity erosion looms large. What’s Next for Shaken Investors? Crypto markets, tethered to tech sentiment, mirrored the bloodbath with Bitcoin slumping below $67K amid $356M liquidations. Precious metals offered scant refuge, gold clinging above $5,000, silver slipping to $83, highlighting broad risk aversion. Traders brace for Fed commentary and tariff headlines, pondering if this marks a healthy reset or prelude to recessionary tremors in an overleveraged landscape.
