The ‘dumb money’ steps in as traders lose $1 trillion on AI’s threat to tech companies first

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Before markets opened in New York this morning, S&P 500 futures showed little change to slight gains, suggesting traders might be temporarily satisfied following the havoc they created in stock markets over recent days. The benchmark dropped 0.51% yesterday to finish at 6,882, after hovering near the 7,000 mark for much of the prior month.

Global markets were little changed or lower this morning, with South Korea’s KOSPI faring worst, sliding 3.86%.

The tech and software sector bore the brunt of the selling, as investors started to recognize that AI’s promise isn’t all positive. Markets had previously expected companies to benefit from massive AI capital expenditures, believing AI would drive new efficiencies and productivity gains that would translate into higher revenue and earnings per share. In recent days, however, traders have responded to concerns about businesses dependent on selling conventional software that AI could replace.

As much as yesterday, according to Bloomberg. declined nearly 2% yesterday and fell an additional 2.53% overnight after disclosing on its earnings call that it intended to double AI capex. The punishment of Alphabet stock occurred even though revenue growth exceeded forecasts, showing the company’s ad sales aren’t being undercut by consumers using AI, including its own Gemini chatbot and Google Search’s ‘AI Mode’.

This matters because tech giants like Alphabet had heavily influenced S&P 500 performance until recently. “By year-end 2025, the 10 biggest firms represented almost 41 percent of the S&P 500’s total weight,” .

However, data indicates the turmoil is largely confined to tech. The equal-weight S&P 500—a theoretical index weighting all 500 companies equally instead of by market capitalization—hit a record high this morning, as non-technology firms within the index are performing quite strongly.

“Tech shares are facing intense pressure, yet many broader indexes remain relatively resilient,” Jim Reid and his colleagues at told clients this morning. There were “363 rising stocks in the S&P 500 [yesterday], the highest number in two weeks.”

Investors are purchasing equities, just not technology shares.

So who’s driving this selective purchasing? , according to Axios. Retail investors—everyday people trading their personal accounts—were once called ‘dumb money’ by Wall Street institutions because they typically entered bull markets too late and exited bear markets too tardily, precisely the wrong approach.

The landscape has shifted, though. Retail traders now comprise a significantly larger market share—through platforms such as Robinhood—and have repeatedly bought the dips, particularly since ‘Liberation Day’ last year when President Trump’s tariff proposals shaved roughly 15% from the S&P before it recovered 38% by year-end, from low to high.

So, are this morning’s S&P futures purchasers correct? Has the selling run its course? “It’s difficult to predict whether this U.S. tech correction will persist, but a fully deployed buy-side appears exposed to any negative developments,” ING’s Chris Turner informed clients this morning.

Here’s a market overview before the New York opening bell this morning:

  • S&P 500 futures gained 0.16% this morning. The previous session ended down 0.51%.
  • STOXX Europe 600 showed little movement in early trading.
  • The U.K.’s FTSE 100 slipped 0.14% in early trading.
  • Japan’s Nikkei 225 declined 0.88%.
  • China’s CSI 300 fell 0.6%.
  • The South Korea KOSPI dropped 3.86%.
  • India’s NIFTY 50 shed 0.57%.
  • Bitcoin fell to $71.2K.