Bold claim: AI could reshape markets, and today’s moves prove that the fear of AI winners and losers is already affecting investors. But here’s where it gets controversial: the fear isn’t just about who benefits from AI, it’s about who might be left stranded as costs rise and profits compress. Here’s a clear, beginner-friendly rewrite that preserves all key information and adds a bit of context.
U.S. stocks declined on Thursday as investors rotated away from companies perceived to be potential losers from artificial intelligence. The S&P 500 slipped 1.1% after erasing an early gain that would have put it near an all-time high. The Dow Jones Industrial Average fell about 472 points, or 0.9%, by 2:20 p.m. Eastern time, while the Nasdaq composite dropped around 1.7%.
AppLovin dropped 18.3% despite reporting stronger quarterly profits than analysts expected. Like many software firms, it’s facing pressure from worries that AI could disrupt its business model and dramatically change how people use the internet. AppLovin CEO Adam Foroughi pushed back on the concerns during a conference call, saying indicators show the company is performing well and that there’s a disconnect between market sentiment and the business reality. Still, the stock’s decline widened its decline for the year to roughly 32% as of that day.
Cisco Systems also fell sharply, down about 11.6% after beating profit and revenue expectations for the last quarter. The company signaled it may earn less profit per dollar of revenue in the coming quarter than it did previously, which analysts interpreted as a sign that rising prices for computer memory—driven by AI demand—could squeeze margins.
Analysts are weighing whether heavy investments in AI will translate into sufficient profits and productivity to justify the high spending. AI worries have especially hit software stocks, but the ripple effects are spreading to other sectors and markets. For example, UBS strategists warned that AI disruption risk could depress bond prices through this year and next, even though the exact timing remains uncertain. Their report notes a higher risk of defaults in junk and other low-rated bonds, which could raise borrowing costs for even financially solid companies, including major tech names financing AI investments. A more severe scenario suggests these knock-on effects could curtail capital spending and the broader AI boom.
Meanwhile, some AI-enabled players are benefiting. Equinix surged 10.9% after projecting 2026 results that topped expectations, with CEO Adaire Fox-Martin stating that demand for the company’s solutions has never been higher. Equinix’s data centers are central to powering the ongoing AI transition.
Outside the tech sector, McDonald’s rose 1.9% after reporting stronger quarterly profits, citing price-cutting and value-focused moves on U.S. combo meals as drivers. Walmart climbed 3.6%, helping lift the S&P 500, as a report suggested U.S. retail spending stalled in December but left room for optimism about consumer resilience.
In the bond market, Treasury yields declined as investors sought safer places to park capital. A weekly jobless claims report showed slightly more Americans filed for unemployment benefits than economists expected, but the figure remained lower than the prior week, hinting at an improving pace of layoffs. A separate robust jobs report published the previous day had already suggested the labor market was strengthening.
A stronger job market could push the Federal Reserve to keep rates steady and pause on cutting, even if political calls for lower rates persist. The balance is tricky: lower rates can stimulate growth but risk fueling inflation.
All eyes now turn to Friday’s inflation data for the U.S. consumer price index. Economists expect a slowdown to around 2.5% from 2.7% in December. Separately, a report indicated that sales of previously occupied homes fell more than economists anticipated, adding downward pressure on yields.
The 10-year Treasury yield declined to about 4.10% from 4.18% the day before.
Across international markets, South Korea’s Kospi jumped 3.1% on gains in Samsung Electronics, SK Hynix, and other tech names. European markets and most other Asian markets rose more modestly. Hong Kong’s Hang Seng fell 0.9%, while France’s CAC 40 edged up 0.3%.
Stan Choe, The Associated Press. AP Business Writers Chan Ho-him and Matt Ott contributed.
