Stocks: ‘Dumb money’ steps in as traders lose $1 trillion on AI fears
S&P 500 futures were flat this morning before markets opened in New York, a sign that traders may be done with the carnage they have wreaked on stock markets over the past few days. The index fell 0.51% yesterday, closing at 6,882, after spending most of the previous month flirting with the 7,000 level.
Markets were flat or lower globally this morning, with the worst performer being South Korea’s KOSPI, which lost 3.86%.
The damage has come from the technology and software sector, where investors are beginning to realize that the promise of AI won’t always be sunshine and roses. Until recently, markets assumed that companies would benefit from the massive amount of capital expenditures going into AI, and that AI would generate new efficiencies and higher productivity that would ultimately lead to higher revenues and earnings per share. However, over the past few days, traders have been reacting to the idea AI also has the potential to destroy companies’ revenues Relying on traditional software that can be replaced by artificial intelligence.
as far as A trillion dollars has been wiped off the market capitalization of software companies Yesterday, according to Bloomberg. alphabet The company closed down nearly 2% yesterday and lost another 2.53% overnight after revealing on its earnings call that it plans to double its AI capital expenditures.
This is a problem because until very recently, the S&P 500’s performance was governed by the heavy weighting of technology stocks, such as Alphabet, within it. “By the end of 2025, the 10 largest companies represented approximately 41 percent of the total weight of the S&P 500.” According to RBC Wealth Management.
But the data says chaos is mostly just a technological phenomenon. The equal-weighted Standard & Poor’s 500 index — the theoretical index that rates each of the 500 companies equally rather than by total market capitalization — actually hit a record high this morning because the non-technology companies within it were doing so well.
“Technology stocks are under severe pressure, but many of the broader indices are still holding up for the most part,” says Jim Reid and his team at Deutsche Bank Tell customers this morning. There were “363 rises in the S&P 500 (yesterday), which is actually the most in two weeks.”
People buy stocks, not technology stocks.
So who is behind this selective buying? Retail traders who like to buy on the dipAccording to Axios. Retail buyers—ordinary people who trade their own accounts—were referred to as “dumb money” among institutional investors on Wall Street because they historically waited too long to jump into bull markets and sold too late in bear markets, which is the opposite of what you want to do.
But things have changed. Retail buyers make up a much larger portion of the market than they used to — via platforms like Robinhood — and have consistently caught dips, especially since “Liberation Day” last year when President Trump’s tariff plan cut nearly 15% off the S&P before rebounding 38% by the end of the year, hitting a peak.
So, are the buyers of S&P futures this morning right? Is the sale over? “It is very difficult to say that this US technology correction has legs, but the entire invested buy side seems vulnerable to any bad news.” ING’s Chris Turner told clients this morning.
Here’s a quick snapshot of the markets before the opening bell in New York this morning:
- Standard & Poor’s 500 Futures rose 0.16% this morning. The last session closed with a decrease of 0.51%.
- Stokes Europe 600 It was flat in early trading.
- FTSE 100 index in the United Kingdom It decreased by 0.14% in early trading.
- Japan’s Nikkei 225 decreased by 0.88%.
- China CSI 300 Decreased by 0.6%.
- South Korea Cosby Decreased by 3.86%.
- India Nifty 50 Decreased by 0.57%.
- Bitcoin It fell to $71.2 thousand.
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