‘AI Derangement Syndrome’ Hammers U.S. Stocks, Prompting CEOs to Curb Their Enthusiasm

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S&P 500 futures declined 0.32% ahead of the New York market open, following a 0.54% drop for the index yesterday, indicating a current aversion to U.S. equities among investors.

With a modest year-to-date gain of just 0.93%, the index’s performance is weak relative to international markets. The U.K.’s FTSE 100 has climbed nearly 10% in the same period. The STOXX Europe 600 has advanced 6.53% to reach a record high. Japan’s Nikkei 225 is up nearly 14%, while South Korea’s KOSPI has surged an impressive 45%.

Growth is evident globally, but not in the U.S.

The reason?

According to a client email from Yardeni Research, the cause is “AI derangement syndrome.”

Investors have grown so wary of AI-related stocks that it is negatively impacting the entire U.S. market. A prime example is Nvidia, the AI chipmaker that is the world’s largest company by market capitalization. Nvidia’s business performance has been undeniably strong, with its latest earnings report being another record-breaking, expectation-exceeding result.

However, within the S&P 500, even strong performance is penalized, as Nvidia’s stock dropped 5.46% yesterday and is down 0.86% for the year. Bespoke Investment Group noted, “Out of 13 total quarterly reports, [Nvidia] has reported ten triple plays (beat earnings per share, beat sales, raised guidance). In its first six earnings reports following the release of ChatGPT, NVDA shares averaged a one-day gain of +10% on its earnings reaction day. Following its last seven reports, though, shares have averaged a decline of -3%.” (Bespoke monitors a custom “AI Doom basket” of stocks, illustrating the current negative sentiment traders hold toward AI.)

In fact, AI-linked technology stocks are pulling down the overall S&P 500. The equal-weight version of the index—which treats each stock equally regardless of market capitalization—has risen 6.7% year-to-date. This suggests the U.S. market would be performing better without the dominant tech stocks. In contrast, the tech-heavy Nasdaq Composite is down 1.56% this year.

“The main driver [of the market’s recent decline] was a serious slump for semiconductor stocks,” Jim Reid and his Deutsche Bank colleagues informed clients this morning.

Some analysts now view AI as a liability rather than an asset. “If AI continues to disrupt, if not destroy, more and more business models, won’t that cause a recession?” Ed Yardeni of Yardeni Research questioned in a recent email.

“It might if it triggers lots of white-collar layoffs, which in turn lead to blue-collar job losses. Alternatively, it might cause a credit crunch in the private credit markets. Allianz AG has raised its private credit default forecast, with its strategists warning that losses could reach as high as 15% in a worst-case scenario, up from 13% just weeks ago,” he stated, citing Bloomberg.

Corporate America seems to be gradually realizing that constantly emphasizing AI is detrimental. Bespoke monitored AI mentions in conference calls by Meta, Microsoft, Alphabet (Google), Amazon, Apple, and Nvidia, finding that CEOs are reducing their references to AI.

“‘AI’ was mentioned 348 times this quarter. As shown below, that’s down quite a bit from the 401 ‘AI’ mentions last quarter, and it’s 102 fewer than the peak ‘AI’ mentions during the Q1 2025 earnings season,” the group reported.

Here’s a snapshot of the markets this morning prior to the opening bell in New York:

  • S&P 500 futures were down 0.32% this morning. The index closed down 0.54% in its last session.
  • STOXX Europe 600 was up 0.22% in early trading.
  • The U.K.’s FTSE 100 was up 0.4% in early trading.
  • Japan’s Nikkei 225 was up 0.16%.
  • China’s CSI 300 is down 0.34%.
  • The South Korea KOSPI was down 1%.
  • India’s NIFTY 50 was down 1.25%.
  • Bitcoin declined to $66.8K.