AI stock sell-off threatens broader market stability

Investors are dumping AI-linked stocks, causing a sharp sell-off in the technology sector and raising concerns about broader market stability. The iShares Semiconductor ETF has fallen over 23% in the past month, while the Dow Jones Industrial Average has gained 4.1%. The rotation away from AI is driven by fears that companies are overborrowing for capital investments, with Intel and Cerebras Systems down nearly 50%. Outside tech, the equal-weighted S&P 500 has climbed over 5%, but tech's 37% weight in the benchmark makes the shift detrimental at the index level. Barclays strategists note the sell-off stems from doubts about the AI infrastructure supercycle, while Goldman Sachs warns a Democratic sweep in midterm elections could pressure tech further. BTIG analysts say broad market risk remains despite tactical opportunities elsewhere.