There's a Rout in Tech Stocks. What's Going On?

Look at a heat map of the S&P 500 index over the past week and you’ll see that the technology sector is bright red, indicating major losses. Some of tech’s biggest names are flirting with double-digit losses or are already well into them — over the space of just one week.

• Advanced Micro Devices (AMD +8.32%) has plummeted almost 21%.
• Intuit (INTU +2.04%) is down more than 17%
• Micron Technology (MU +3.17%) is down almost 13%. 
• Microsoft (MSFT +2.00%) is down about 7%
• Nvidia (NVDA +7.87%) has tumbled 9% in a week. 
• Salesforce (CRM +0.80%) has fallen 12.5%.

The losses in tech stocks go on and on. It’s getting ugly.

It’s been a three-month decline for tech stocks

In fact, the slump in U.S. technology stocks has been going on for three months. Those are all growth stocks — companies that increase their earnings faster than the average business in their industry or the market as a whole.

And while growth stocks like the “Magnificent Seven” have led the market forward for much of the past three years, over the past three months investors have shown a new preference for value stocks — less volatile stocks of companies that grow more slowly but often have valuations that are cheap relative to their earnings and long-term growth potential.

The Russell 1000 Value index is up 8.4% since Halloween, while the tech-heavy Russell 1000 Growth index is down 3.7%. Market and economic analyst Ed Yardeni of Yardeni Research calls it “AI fatigue.”

For several years, investors relentlessly bid technology stocks higher due to seemingly unrelenting optimism that the artificial intelligence trade would pay off. But increasingly over recent months — and then dramatically over the past week — investors have soured on AI, doubting its ability to improve corporate financial performances and the broader economy as significantly as once believed.

Investors had driven tech stocks so high, so quickly, that the slightest disappointment — or mere hint of one — has sent stocks crashing. That was the case just last week with Microsoft. The software giant released results for its fiscal second quarter, ended Dec. 31, 2025, and beat Wall Street expectations on both sales and earnings.

Software companies suddenly look vulnerable to AI

But because there were signs that cloud revenue — revenue closely tied to AI — was slowing, the stock cratered, down 11% that day, the largest one-day drop in the tech giant’s stock since March 2020.

There are also worries in the market that AI will eat its own. That is, that the self-learning technology will put many software providers out of business by providing the same services but at a fraction of the cost. Thus, the IGV Software index, which tracks U.S. and Canadian software, interactive media, and entertainment companies, is down by almost a third from its September high.

Market analysts have long expected AI to be highly disruptive to the U.S. economy and financial markets, though there was always debate about what that disruption would look like. We’re seeing it now in the sudden tech sell-off. Tech investors will need nerves of steel going forward.