Wall Street is starting to sour on artificial intelligence stocks, and they’re dragging the broader market down with them.
The Nasdaq Composite fell another 1.6% in Tuesday morning trading, bringing its 2025 decline to 1.7%. The S&P 500 was down 0.8%. The Dow, which is far less exposed to highflying AI stocks than the other major indexes, was down just nine points and moving between positive and negative territory.
Market participants were selling chips, with the iShares Semiconductor ETF falling 1.5%. Super Micro Computer was the second-worst performer in the S&P with a 9.3% drop. It was followed by Vistra, a utility that benefitted from hopes of AI data center demand for power, which was down 8.7%. S&P 500 utilities were together down 1.8%, trailed by consumer discretionary’s 1.7% drop. Tech, communication services, and energy were all down more than 1%.
“This Tech tape and the former AI winner bucket sure feels at a major breaking point with retail, quants, passives and now maybe active managers starting to unwind positions and de-risk / de-gross into NVDA tomorrow night,” writes Mizuho analyst Jordan Klein. “We can all say that this unwind was inevitable at some point this yr after a major rally past 2 yrs when a flood of new money rushed in (many novice or “tourists” vs experienced investors).”
All of the Magnificent Seven stocks were dropping. Tesla, down 7%, was the biggest laggard, followed by Nvidia with a 3.9% decline; Meta Platforms and Amazon.com were down 2.8%; Alphabet was down 1.9%; Microsoft was down 1.3%; Apple was holding up better than the rest with a decline of 0.7%.
Nvidia’s earnings report on Wednesday will be a major test for the AI trade. If the chip maker can somehow buck recent worries with another blowout report, it could counter the recent slide that’s triggered the Nasdaq’s worst four-day stretch since September. Further disappointment will put even more pressure on the S&P’s consumer staples and real estate sectors.
The AI trade has a deep influence on the major indexes, aside from the Dow; the S&P’s struggles came despite 253 of its members rising on the day.
The Invesco S&P 500 High Beta ETF, which is made up of the S&P’s riskiest stocks, was down 1.5%. Instead, traders were turning to less-risky stocks: The Invesco S&P 500 Low Volatility ETF was up 0.8%.
