For stock market, AI turns from lifting all boats to sinking ships

Core Viewpoint - The artificial intelligence (AI) landscape is becoming increasingly volatile, shifting from a broad market uplift to specific stock declines, particularly affecting technology and related sectors [1][2]. Group 1: Market Dynamics - Enthusiasm for AI has driven a bull market in the U.S., particularly benefiting technology companies and those involved in data center infrastructure [2]. - Concerns regarding AI's disruptive potential are causing investors to reassess valuations in various industries, including software and wealth management [3]. - Major companies like Amazon and Microsoft are facing pressure on their share prices due to scrutiny over their significant AI capital expenditures [4]. Group 2: Stock Performance - The S&P 500 software and services index has seen a decline of 15% since the end of January 2026, influenced by AI-related news [4]. - Shares of U.S. brokerages and insurance companies have dropped significantly, with firms like LPL Financial and Charles Schwab each falling by at least 7% following the introduction of AI features by competitors [5]. - Microsoft shares are down 16% and Amazon over 11% this year, reflecting concerns about their high capital spending on AI [7]. Group 3: Investment Opportunities - Some investors view the current market as a buying opportunity, with the forward price-to-earnings ratio for the software and services index falling to 22.7 times, the lowest in nearly three years [9]. - JPMorgan equity strategists recommend increasing exposure to higher-quality, "AI-resilient" software companies, suggesting a potential rebound in the market [9]. - Economic "moats" are highlighted as a means for investors to identify strong companies amidst the volatility, as indiscriminate selling creates investable opportunities [9]. Group 4: Future Outlook - The S&P 500 is projected to see earnings rise over 14% in 2026, with expectations of further interest rate easing by the Federal Reserve [11]. - However, AI-driven volatility is complicating stock selection, with S&P 500 constituents that are down averaging a 10.6% decline, compared to a 5.9% decline for the same period last year [12].