Wall Street ended sharply lower on Tuesday as investors worried about artificial intelligence (AI) creating more competition for software makers, keeping them on edge ahead of quarterly reports from Alphabet and Amazon later this week.
AI heavyweights Nvidia and Microsoft both fell. Alphabet dropped ahead of its report on Wednesday, while Amazon declined ahead of its Thursday report.
Investors in recent months have become pickier about AI-related stocks, looking for companies generating measurable returns from their outsized investments in the new technology.
Wall Street’s attention on Tuesday turned to technology companies that could face steeper competition and lower margins as a result of AI. One catalyst driving those concerns was Anthropic’s launch of a legal tool for its Claude AI chatbot.
“We're looking at a lot of software names that are seen as companies that may well be disrupted when we start to see the advancement of artificial intelligence. We're seeing a lot of software companies across the spectrum get hit,” said Art Hogan, chief market strategist at B. Riley Wealth.
Salesforce, Adobe, Synopsys, Datadog, Atlassian and Intuit fell sharply.
AI data firm Palantir bucked the trend, rallying after strong quarterly results late on Monday.
The S&P 500 software and services index fell for a fifth consecutive day.
"We've got an expensive market and expectations are really high. Many areas, especially around AI, are priced for perfection. That's just got us in a skittish environment," said John Campbell, senior portfolio manager, Allspring Global Investments.
Healthcare stocks came under pressure after Wegovy maker Novo Nordisk warned that it expected a steep decline in annual sales. The company's U.S.-listed shares plummeted.
Rival Eli Lilly fell, as did obesity drugmakers Viking Therapeutics and Structure Therapeutics.
Walmart climbed to become the first brick-and-mortar retailer ever to hit $1 trillion in stock market value.
Advanced Micro Devices fell ahead of its quarterly report after the bell.
Walt Disney dipped after it named theme parks head Josh D'Amaro as CEO, placing a longtime insider at the helm and ending succession uncertainty.
PayPal slumped after it forecast 2026 profit below estimates.
According to preliminary data, the S&P 500 lost 59.04 points, or 0.85%, to end at 6,917.40 points, while the Nasdaq Composite lost 336.20 points, or 1.42%, to 23,255.91.
The Dow Jones Industrial Average fell 170.98 points, or 0.35%, to 49,236.68.
With one quarter of the S&P 500 set to report quarterly results this week, analysts expect companies to have grown their earnings nearly 11% in the December quarter, up from an estimate of about 9% at the start of January, according to LSEG data.
Pfizer fell despite posting fourth-quarter profit above estimates, while Merck rose after quarterly results.
PepsiCo shares gained after the company announced price cuts on core brands such as Lay's and Doritos.
Meanwhile, legislation to end a U.S. government shutdown narrowly cleared a procedural hurdle in the House of Representatives, setting up a vote on final passage later in the day.
The partial shutdown has postponed releases of key jobs data on Friday along with the JOLTS report, originally expected on Tuesday.
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The Iranian national football team is set to arrive in North America for the World Cup after finally securing travel documents, but a dispute over U.S. visa approvals continues to cast a shadow over the country's tournament preparations.
Azerbaijan's Foreign Ministry has confirmed the number of casualties its citizens suffered as a result of the 5 June drone attacks on the cargo ships Natra and Zircon in the Sea of Azov. In a statement, it said four Azerbaijani citizens were killed and four others were injured.
The United Nations Assistance Mission in Afghanistan (UNAMA) has warned ahead of World Environment Day that Afghanistan's worsening water crisis is disproportionately affecting women and girls, who bear much of the responsibility for securing water for their families.
Iraqi Prime Minister Ali Falih al‑Zaidi will pay an official visit to the United States, bringing with him a delegation of business leaders, private‑sector representatives and banking officials, in an effort to boost investment and deepen economic ties with Washington.
Counting is underway in Armenia's elections. The results of the vote are set to determine the political direction of the country of three million people for the next few years. Prime Minister Nikol Pashinyan is hoping to fend off challenges from several pro-Russia candidates to secure a third term.
Armenian authorities arrested six candidates from the pro-Russian Strong Armenia bloc on Saturday, one day before voters were due to take part in parliamentary elections.
More than 6,000 people gathered outside a vote-counting centre in Seoul on Friday night, demanding this week’s local elections be repeated after ballot shortages left some voters unable to cast their ballots.
Azerbaijan's Foreign Ministry has confirmed the number of casualties its citizens suffered as a result of the 5 June drone attacks on the cargo ships Natra and Zircon in the Sea of Azov. In a statement, it said four Azerbaijani citizens were killed and four others were injured.
The U.S. said it struck Iranian radar sites on Qeshm Island and in Goruk after intercepting four drones, while Iran's Revolutionary Guards said they launches retaliatory strikes on four tankers in the Strait of Hormuz and targeted U.S. bases in the Gulf.
Chinese carmakers are rapidly reshaping the global automotive market, with record exports, soaring electric vehicle sales and growing investments overseas putting pressure on established European, Japanese and U.S. rivals.
The International Labour Organization (ILO) has begun its latest round of negotiations on creating the first binding global standards for platform-based work, covering services such as ride-hailing, food delivery and other app-based work.
European companies are continuing to deepen their presence in China, with nearly seven in ten firms maintaining or expanding their supply chains despite global efforts to diversify, according to a new survey by the EU Chamber of Commerce.
BP has removed its chair, Albert Manifold, with immediate effect, citing concerns over governance and conduct. The company said its board had unanimously decided that Manifold should no longer serve as chair or director.
The dual-class share structure outlined in SpaceX’s initial public offering (IPO) filing, which gives chief executive Elon Musk outsized control, has reignited one of Wall Street’s longest-running debates over corporate governance.
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