Wall Street’s most popular trades are breaking down in unison, signaling a decisive shift in market psychology. The retreat has not been triggered by a single shock, but by a steady accumulation of concerns that valuations had stretched too far. As confidence cracked, investors pulled back simultaneously from assets that had defined the market’s upside over the past year, from mega-cap technology and artificial intelligence plays to gold and cryptocurrencies.

Equities Slide as AI Anxiety Deepens

U.S. equities extended their selloff on Thursday, with the S&P 500 falling 1.2% for a third straight decline and the Nasdaq 100 posting its deepest drop since April. Software stocks were among the hardest hit after Anthropic unveiled a new AI model designed to perform financial research, reviving fears that rapid technological displacement could undercut existing business models faster than expected.

The pressure intensified after hours when Amazon.com Inc. plunged more than 11% after announcing plans to invest $200 billion this year. While management framed the spending as a long-term AI bet, markets interpreted it as a sign that capital discipline across big tech may be eroding just as returns become harder to justify.

Crowded Trades Unwind Across Asset Classes

The selloff was not confined to equities. Silver, which had ridden gold’s surge to record highs, collapsed 20%, while Bitcoin dropped more than 13%, erasing all gains accumulated since President Donald Trump’s election 15 months ago. In both cases, leverage played a decisive role. As prices turned, investors rushed to unwind borrowed positions, accelerating losses and amplifying volatility.

By contrast, U.S. Treasuries rallied, resuming their traditional role as a refuge when risk appetite evaporates. The shift underscored how quickly investors are rotating away from momentum-driven strategies toward capital preservation.

Global Contagion and Defensive Positioning

The anxiety spilled into global markets. Asian equities weakened sharply, with South Korean stocks sliding more than 5% intraday as chipmakers Samsung Electronics Co. and SK Hynix Inc. dragged on sentiment. European shares followed suit, while Nasdaq 100 futures pointed lower, reinforcing the sense of a synchronized global pullback.

Market participants describe a rapid change in tone. Investors who entered the year expecting a prolonged rally are now prioritizing downside protection, a psychological pivot that often magnifies short-term drawdowns.

The Macro Undercurrent

The reversal comes despite an outlook that, on paper, remains constructive. Earnings have largely held up, and expectations for AI-driven productivity gains persist. Yet risks are gaining prominence. Questions around whether massive AI investments will ultimately pay off are colliding with uncertainty over the future direction of the Federal Reserve, particularly if Kevin Warsh is confirmed to replace Jerome Powell as chair.

Fresh labor-market data added to the unease, with announced job cuts in January reaching levels last seen during the depths of the 2009 recession, raising doubts about economic momentum.

What to Watch Next

Looking ahead, markets will hinge on whether this retreat becomes a cleansing correction or the start of a deeper de-risking cycle. Much depends on whether earnings can justify valuations and whether AI spending translates into tangible returns. Until clarity improves, investors appear inclined to trade defensively, even at the cost of abandoning yesterday’s favorites.