Wall Street retreated sharply on Thursday as investors shifted focus from artificial intelligence’s growth promise to its potential to disrupt entire industries. The Dow Jones Industrial Average fell 530 points, or 1.1%, while the S&P 500 shed 1% and the Nasdaq Composite lost 1.5%. What had been a market powered by AI optimism is now confronting a more complex reality: the technology may reshape profit pools faster than companies can adapt.

AI Disruption Spreads Beyond Tech

The selling pressure was not confined to traditional technology names. Financial stocks such as Morgan Stanley came under strain amid concerns that AI-driven advisory tools could compress wealth management margins. In logistics, CH Robinson plunged 22% on fears that advanced AI systems could streamline freight matching and reduce the need for intermediaries, directly threatening revenue models.

Real estate was also caught in the downdraft. Shares of CBRE and SL Green Realty declined as investors contemplated a longer-term scenario in which automation and AI-related productivity gains translate into workforce reductions, potentially dampening demand for office space. For professional investors, including those in Israel with exposure to U.S. real estate and financial assets, the repricing reflects a broader reassessment of structural risk rather than a cyclical pullback.

The shift underscores a growing debate on Wall Street: while AI may lift aggregate productivity, its transitional impact could disproportionately hurt specific sectors.

Software Rout Deepens as Valuations Reset

Software stocks, already under pressure in recent weeks, extended their year-to-date losses. Salesforce fell 2%, bringing its annual decline to more than 31%, while Autodesk dropped over 5%, deepening its 26% slide this year. The iShares Expanded Tech-Software Sector ETF (IGV) declined 3% and now sits roughly 32% below its recent peak.

The speed of the move suggests sentiment is playing as large a role as fundamentals. As Baird strategist Ross Mayfield noted, the dynamic resembles “sell first, analyze later.” When valuations are elevated and narratives shift abruptly, portfolio managers often reduce exposure quickly to avoid being caught in crowded trades.

Adding to the risk-off mood was a 9% plunge in silver futures, a popular retail trade this year. The unwind in precious metals highlights broader de-risking across speculative pockets of the market.

Defensive Rotation and Macro Crosscurrents

Capital rotated into defensive sectors. Walmart and Coca-Cola gained 3% and 2%, respectively, while consumer staples and utilities led S&P 500 sector advances, each rising more than 1%. The move reflects a classic flight to stability when uncertainty rises.

Thursday’s volatility also unfolded against a shifting macro backdrop. While a recent jobs report initially sparked optimism, revisions showing zero job growth in the latter half of 2025 tempered enthusiasm. Investors are now awaiting January’s consumer price index data, expected to show a 0.3% increase in both headline and core inflation.

If inflation surprises to the upside, markets may tolerate it temporarily given employment resilience, but sustained price pressures could complicate Federal Reserve policy expectations. Conversely, a softer reading could prompt a short-term rebound in risk assets.

Looking ahead, markets appear to be entering a phase where thematic AI exposure alone is insufficient. Investors will likely demand clearer earnings resilience and evidence of competitive adaptation. The coming weeks may determine whether AI remains a net-positive catalyst or evolves into a source of structural volatility.