US Stocks Fall as Investors Sort 'AI Winners'

- The sell-off punished some tech companies even with strong financial results; software company AppLovin fell 19.7% and Cisco Systems dropped 12.3% despite beating profit expectations, as investors worried about AI's potential to undercut their businesses. - Conversely, companies providing essential infrastructure for AI were rewarded, such as data center firm Equinix, which saw its stock jump over 10% after forecasting strong demand for its services. - The anxiety extends beyond individual stocks to the credit markets, where strategists from UBS have warned that "AI disruption risk" could lead to a higher rate of defaults in the junk-bond market. - A key catalyst for the software sector's recent downturn, which has seen the S&P 500 software and services index fall 15% since the end of January, was the launch of plug-ins for Anthropic's "Claude Cowork" agent, intensifying fears of disruption. - This market re-evaluation is a global phenomenon, with India's Nifty IT index, for example, falling over 10.5% year-to-date as of February 12, 2026, on fears that AI will erode the high-margin application services offered by major IT firms. - According to Michael O'Rourke, chief market strategist at JonesTrading, the average decline for underperforming S&P 500 stocks this year is 10.6%, significantly steeper than the 5.9% average drop for laggards at the same point last year, indicating a less forgiving market. - Investor sentiment has shifted, with risk appetite among US equity investors dropping to a four-month low in February, and a notable rotation out of the technology sector into industrials for the first time in six years. - Analysts note that while earnings expectations for the "Magnificent Seven" tech stocks have risen significantly, profit forecasts for the other 493 companies in the S&P 500 have remained largely unchanged, suggesting the market does not yet see AI boosting profitability for the broader corporate world.