By: Steve Sosnick, Chief Strategist
This morning’s opening was a bit surprising. Overnight futures reversed Friday’s gains, though they had improved somewhat as US traders woke up. That’s unsurprising – early morning dip buying is almost Pavlovian for many. Yet it was surprising to see the S&P 500 (SPX) open flattish and turn briefly positive after the bell rang. That didn’t last long, to say the least, as AI-related fears once again gripped software stocks and moved into financials.
The proximate cause is said to be a report by Citrini Research1 that offers a scenario where agentic AI disrupts business models in a wide range of industries, starting with software-as-a-service companies and then spreading into other businesses that rely on repeat customer behavior. Those include payment providers like Visa (V) and MasterCard (MA), and delivery companies like DoorDash (DASH), before spreading into other financials and then affecting the economy at large and wreaking havoc on employment. Unfortunately, I’m relying only upon news articles about the report as I have not been able to read it directly. Frankly, I had never even heard of this firm prior to today and thus don’t have access to their research. But as we learned from the market’s reaction to another recently published viewpoint that compared impending AI adoption to the onset of Covid (I both read that one and subsequently met the author, btw), investors are fretting about the new technology in a way that they hadn’t before.
We noted the change in investor psychology almost two weeks ago, when we wrote:
“For most of the past three years, investors took a “glass half-full” approach to AI. It was, “What can AI do to make a business or industry more efficient?” It now seems to be “How can AI ruin a business’s or industry’s profitability model?” – and rather than searching for winners, investors are hunting for potential losers.”
That change in mentality brought us sequential selloffs in software stocks like AppLovin (APP) before moving onto insurance brokers like AON, wealth managers like Raymond James (RJF) and Charles Schwab (SCHW), real estate brokers like CBRE, and logistics companies like CH Robinson (CHRW). Today we can add a wide range of other financial stocks, including V, MA, Capital One (COF), JPMorgan (JPM), and many more.
Sentiment was already jittery after the weekend announcement that President Trump would be raising across-the-board tariffs to 15%2. Just one day earlier he had announced 10% tariffs under the authority of Section 122 of the 1974 Trade Act. If the initial announcement seemed like a knee-jerk reaction to the Supreme Court’s decision that invalidated the President’s ability to authorize tariffs under emergency authority, the nearly immediate follow-up was construed by many as either capricious or vindictive. Neither is an appealing motivation for investors. Although the new set of tariffs is mandated to expire after 150 days, the President’s determination to utilize tariffs as both a funding and negotiating tool means that we will need to concern ourselves with how those policies might adapt in the coming months. The Supreme Court’s decision seemed likely to remove a level of uncertainty from the global economy, but that no longer appears to be the case.
The software sector selloff is a reminder of what can happen when momentum-driven sectors shift into reverse. The broader, more important question is how many sectors can go into reverse before they drag the broader market along with them? One can construct a scenario where investors favor seemingly AI-resistant sectors like Utilities, Energy, Health Care, and Consumer Staples. Not coincidentally, those are the only four gainers today.The first two are direct beneficiaries of AI spending (like Semiconductors, which is down today), while the latter two seem relatively impervious to AI disruption. Investors might also see these developments as a sign to reduce risk overall, whether by diversifying into non-US markets or fixed income. Or, this could just be another in a long list of buying opportunities…
Originally posted on February 23, 2026 on Traders’ Insight
PHOTO CREDIT: https://www.shutterstock.com/g/Taris+Tonsa
VIA SHUTTERSTOCK
FOOTNOTES AND SOURCES:
1https://www.msn.com/en-us/money/savingandinvesting/there-s-another-ai-doom-post-doing-the-rounds-this-time-the-s-p-500-dives-nearly-40/ar-AA1WTDIY?ocid=BingNewsVerp
2https://www.msn.com/en-us/news/other/trump-boosts-new-tariff-rate-to-15-a-day-after-announcing-10/ar-AA1WObNS?ocid=BingNewsVerp
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