S&P 500 falls as AI, tariff fears hit tech

U.S. stocks fell while bonds advanced as renewed AI fears over profitability collided with tariff uncertainty, a combination that raised volatility and undercut risk appetite, as reported by Bloomberg. The session’s tone reflected growing concern that generative AI could compress software margins just as trade policy ambiguity clouds supply chains and costs. The result was broad de-risking into the open.

Why markets fell: AI fears and tariff uncertainty

Anxiety around artificial intelligence is centering on whether heavy capital spending (capex) on models and infrastructure will outpace near‑term revenue, and whether productivity gains arrive fast enough to defend software margins. According to Business Insider, traders leaned into a “software apocalypse” narrative alongside new tariff uncertainty, pressuring tech and adjacent sectors. The concern extends to white‑collar displacement risk, job functions that could be reshaped by automation, potentially scrambling near‑term demand signals even if long‑term efficiencies materialize.

Tariff headlines revived memories of the US‑China trade war and introduced questions about where policy may land on critical components, from semiconductors to electronics. Unclear tariff scope forces companies to model multiple cost paths at once, reroute supply chains, and build inventory buffers, all of which can weigh on gross margins and free cash flow. With pricing power uneven across industries, any cost pass‑through risks adding to inflation at a time when policy rates remain restrictive.

Why it matters: earnings, supply chains, inflation, software margins

Earnings sensitivity runs through three channels: higher input costs from potential tariffs, elongated delivery times from supply‑chain rerouting, and uncertain software monetization as customers evaluate AI return on investment. Capex, capital expenditures on data centers, chips, and model training, can lift depreciation and operating complexity before revenue scales, challenging margin guidance in the near term.

Against that backdrop, some industry voices are pushing back on blanket pessimism about software. “AI is not a death sentence for software companies,” said Dan Ives, tech analyst at Wedbush Securities, noting that investors are conflating short‑term disruption with longer‑term growth potential. If adoption curves follow prior platform shifts, revenue expansion could lag investment initially but improve as use cases standardize.

Policy trajectory remains a key macro swing factor. As per Axios, Paul Tudor Jones warned the US‑China trade war may prove difficult to unwind, suggesting that uncertainty could persist even if specific tariff measures are tweaked. Prolonged ambiguity would keep risk premia elevated, complicating corporate planning for 2026 budgets and beyond.

Immediate impact: stocks drop, yields slide, bitcoin weakens

Headline sensitivity dominated tactical flows, with equities lower and duration bid, while Treasury yields and bitcoin slid amid reports of ETF outflows and AI‑linked risk aversion, as per Seeking Alpha. Cross‑asset moves were consistent with a de‑risking posture rather than a single‑sector shock, though software and mega‑cap tech shouldered outsized pressure.

At the time of this writing, Nvidia traded around $190 intraday with its Q4 2026 earnings call scheduled for February 25 at 5 p.m. ET, based on data from Yahoo Finance. That timing keeps semiconductors and AI infrastructure in focus, as investors parse order visibility and datacenter demand to gauge whether capex intensity is tracking monetization.

Sector breadth vs concentration: beyond the Magnificent Seven?

Market leadership concentration is back under scrutiny. As reported by MarketWatch, Treasury Secretary Scott Bessent framed much of the drawdown as concentrated in the largest tech names, a “Magnificent Seven” dynamic, while suggesting new tariffs could represent a ceiling unless retaliation escalates. If losses remain top‑heavy, equal‑weight benchmarks could fare better than cap‑weighted peers; if weakness broadens into software, consumer electronics, and industrial tech suppliers, the drawdown would imply a more cyclical earnings concern.

Breadth metrics and guidance dispersion will clarify the path. If software commentary converges on stable net retention, disciplined AI spending, and early monetization, margin fears may ease. Conversely, if tariffs lift input costs across electronics and cloud hardware while customers delay AI deployments, operating leverage could turn negative, keeping volatility elevated even without fresh policy shocks.