Markets Wobble: AI Panic Eases, Traders Brace for US Inflation Print

Reuters, CNBC, Bloomberg, the Wall Street Journal, AP contributed to this report.

Stocks took a breather on Friday after a furious selloff tied to artificial-intelligence fears cooled off — but don’t call it stability. Traders are parking the AI freakout for a minute and zeroing in on Friday’s US consumer-price data, which could decide whether the Fed keeps its foot on the brakes or starts easing.

Quick snapshot: the S&P 500 briefly erased its year-to-date gains this week and finished Thursday with a bruising slide (about 1.6%). The Dow dropped roughly 669 points, and the Nasdaq sank ~2%. European markets and US futures were largely flat overnight, while the MSCI All Country World index looked set for its first back-to-back weekly loss of the year. Asia was choppy: regional bourses mostly slid (the broad drop was about 1.4%), though pockets — like Korea’s KOSPI — bounced hard on chip and AI-related winners.

What happened? Two things collided: fresh jitters about AI’s ability to upend entire businesses, and the market’s impatience for monetary-policy clarity. Software names that the AI story had catapulted higher were the biggest victims when investors started asking whether AI will actually fatten corporate profits or just destroy old models.

Looked-at-now losers: AppLovin plunged almost 20% despite beating earnings — investors freaked out at the idea AI could hollow out ad-tech economics. Cisco tumbled about 12% after warning it may squeeze margins in the quarter ahead, which traders read as a sign of rising costs for components tied to AI builds. Software names broadly got whacked: Palantir, Autodesk and other enterprise plays extended their year-to-date declines.

On the flip side, some companies that sell into the AI boom or into steady consumer demand held up or rallied. Equinix jumped double digits after upbeat guidance — data-center firms remain the literal backbone of AI. Retail stalwarts that feel safe in uncertain times — Walmart (up near 4%) and McDonald’s (around +2.7%) — did well as investors rotated toward defensive, cash-generating businesses.

Bonds and yields: Treasuries rallied a touch as the risk-on mood cooled. The 10-year yield dipped to about 4.10% from the prior 4.18%, a move that reflected demand for safe assets and the market’s reassessment of how many rate cuts are now likely this year.

Commodities and weird stuff: Precious metals had an odd session — silver plunged into double-digit territory on one measure (retail favorite trade unwound hard), while gold found buyers late in the day and bounced back. Bitcoin and crypto were tetchy, not yet ready to lead a risk rally.

Why CPI matters: The jobs data earlier this week surprised to the upside — that gave the Fed reason to pause but also warned against too-quick easing. Now inflation is the tiebreaker. Economists expect January’s CPI to show a modest uptick month-to-month; the big question is whether the core figures come in tame enough for markets to price more rate cuts later in the year. A hot print = fewer cuts, weaker risk appetite. A soft print = potential rally.

Wider ripples: The AI scare isn’t just a tech problem anymore. Traders are fretting that AI could pressure everything from freight logistics to brokerage margins. That worry hit trucking and logistics stocks hard earlier this week, and even commercial real estate took a hit as worries about job losses and lower office demand crept back in. UBS strategists flagged a scenario where AI-driven disruption could pressure lower-rated credits and raise borrowing costs — a messy contagion that would ding even otherwise healthy firms.

Investor takeaway: Volatility is the word. The market’s mood swings are now being driven by two competing narratives — “AI will turbocharge profits” versus “AI will gut old business models and spike costs.” Until inflation data gives the Fed firmer signals, expect more chop. Traders will rotate: today’s dumped software names could be tomorrow’s bargain if profits hold up, or the canary in the coal mine if margins collapse.

The AI scare lost a little steam, but it didn’t vanish. Markets are tired and cautious — looking for a reason to commit one way or the other. Friday’s CPI? That’s your reason.