NEW YORK, Feb 5, 2026, 16:54 (EST)
- U.S. stocks dropped sharply, dragged down by tech shares and a sell-off in crypto.
- Bitcoin plunged over 12% to dip below $64,000, pulling crypto-related stocks down with it.
- Spending on AI is climbing, prompting investors to rethink the trade amid growing concerns about disruption in software.
Wall Street plunged Thursday, dragged down by another drop in tech stocks and a sharp bitcoin sell-off that weighed on crypto-related shares. The S&P 500 dropped 1.2%, the Dow tumbled 592 points, and the Nasdaq retreated 1.6%. Bitcoin dipped over 12% below $64,000 briefly after new U.S. job data sent Treasury yields lower. (AP News)
This is catching attention now because the market no longer views the AI surge as a smooth ride but more like a bill coming due. Alphabet announced it plans to spend up to $185 billion in capital expenditure, or capex, in 2026, prompting a sell-off in big tech stocks. Amazon slipped 4.4% during regular trading and took another 10% hit after hours. “We’re seeing volatility about whether this investment will translate into results,” said Tom Hainlin, investment strategist at U.S. Bank Wealth Management. Melissa Brown, SimCorp’s managing director of investment decision research, described the AI trade as “perhaps the extinguisher this year.” (Reuters)
Software stocks have borne the brunt of selloffs as investors fret that AI tools, heavily funded by big tech, might slash subscription revenues across the board. The S&P 500 software and services index dropped for a seventh session straight, poised to wipe out roughly $1 trillion in market cap since Jan. 28, Reuters calculations show. “Near-term earnings results will be important signals of business resilience,” said Ben Snider, Goldman Sachs’ chief U.S. equity strategist. (Reuters)
Anxiety is mounting over how quickly AI might disrupt enterprise operations. Palantir’s CEO Alex Karp and CTO Shyam Sankar claim their “AI forward deployed engineer” can cut complex SAP ERP migrations from years down to “as little as two weeks.” Karp added that clients bring a “myriad of use cases.” Meanwhile, Jefferies analysts Akshat Agarwal and Ayush Bansal flagged new Anthropic “Cowork” plug-ins as a possible “downside risk to valuations.” SAP pushed back, saying AI agents would “not replace them.” (Fortune)
SaaS, or software-as-a-service, refers to subscription-based software accessed online, promising consistent monthly revenue. ERP, standing for enterprise resource planning, handles the crucial back-office functions like finance and inventory management. The term “AI agents” describes software capable of completing multi-step tasks independently, without manual input at every stage.
The bond market interpreted the latest job numbers as a hint the economy might be slowing, pushing yields lower and sparking renewed bets on Federal Reserve rate cuts. Usually, lower rates boost growth stocks, but this time concerns over earnings and hefty spending took center stage. Traders showed little interest in bargain hunting.
Bitcoin is frequently marketed as a gold-like hedge, yet it generates no cash flow, and its price can swing wildly when leverage unwinds. The recent slump hammered shares of crypto-exposed firms and rippled through other crowded trades. Precious metals, too, have seen volatile daily shifts this week.
The sell-off hit more than just megacaps. A U.S. software ETF dropped as much as 4.1% on Wednesday, hitting its lowest level since April, Bloomberg reported. Among the biggest decliners were AppLovin and Unity. Take-Two Interactive, Adobe, and Omnicom also fell. (Bloomberg)
Still, betting heavily on the doom scenario carries risks. Should earnings reveal AI-driven revenue gains outpacing cost increases, the tech sell-off might slow. Plus, if AI features get added to current subscription services instead of outright replacing them, the hype around “disruption” could fade fast.
Strategists are also looking for clues that recent pressure stems more from positioning than from underlying fundamentals. Manish Kabra, Societe Generale’s lead U.S. equities and multi-asset strategist, noted the market is questioning whether software’s compounding-earnings story might be broken. John Hardy of Saxo Bank described what he sees as “some kind of reset” as leveraged bets unwind across stocks, commodities, and digital assets. (Ajot)
