US STOCKS-Wall Street sinks as tech rout deepens on AI angst

Wall Street's main indexes reversed sharply on Thursday as investors intensified their selloff of technology shares and fled transport stocks amid worries about artificial intelligence disruption, while they digested the latest labor market data and awaited a key inflation report. After starting the day higher, equity indexes turned negative in morning ‌trading and losses deepened as investors sought safer investments.

At a time when investors have been stressed out about the impact AI would have on competition, a less-than-impressive quarterly update from Cisco Systems' soured the market on technology stocks broadly. Transportation companies also got caught up in worries about AI disruption. "The broader narrative within the market is what sectors and industries can increase productivity from AI investments, and on the flip side, what industries are ‌going to be disrupted by AI," said Jack Herr, primary investment analyst at GuideStone Funds.

"We see this as a 'prove it' year for AI. We need to start seeing some return on investments." INVESTORS AWAIT ‌INFLATION REPORT, PARSE JOBLESS DATA

After Wednesday's stronger-than-expected jobs report fueled worries the Federal Reserve could now be less likely to cut rates, investors braced for the January Consumer Price Index report, due on Friday. Thursday's data showed the number of Americans filing new applications for unemployment benefits decreased by less than expected last week, likely as disruptions from winter storms lingered. "We're in that in-between zone between two key economic macro reports," said Marc Dizard, chief investment officer at Huntington Wealth Management. He added the market is also contending ⁠with concerns about ​the impact of AI on companies such as Cisco. Cisco ⁠shares slumped 11%, making it one of the biggest drags on the S&P 500 after the networking equipment provider posted quarterly adjusted gross margin below estimates.

At 2:29 p.m. ET (1929 GMT), the Dow Jones Industrial Average fell 482.69 points, or 0.96%, to 49,638.21, ⁠the S&P 500 lost 80.93 points, or 1.17%, to 6,860.54 and the Nasdaq Composite was down 389.25 points, or 1.69%, to 22,675.88. The S&P 500 software index was down 1%, giving up much of its gains since bouncing back from last ​week's drubbing. Its biggest percentage decliner was AppLovin, whose shares fell 18% after it reported fourth-quarter results. The marketing platform has lost nearly a third of its value in the first six weeks ⁠of the year due to intense competition. The Dow Jones Transport Average lost 4.5%, with CH Robinson and Landstar tumbling about 19% while Expeditors International fell 14%. J.B. Hunt Transport lost 5.5%.

CNBC reported that a new tool from AI company Algorhythm Holdings made trucking companies ⁠the ​latest target of investor worries about AI disruption. The Philadelphia SE Semiconductor index was down 1.6%, and all Magnificent 7 stocks declined, with Apple and Amazon.com representing the biggest drags on the S&P 500.

Big Tech results have revived investor worries about ambitious capital spending this year, with Amazon, Google , Meta and Microsoft collectively expected to spend around $650 billion in the race for AI dominance. Equinix jumped 11% after the largest data-center operator forecast ⁠annual revenue above estimates on Wednesday, betting on strong AI-linked demand. Its gain helped boost the S&P 500 real estate index, which was last up 0.9%. Personal-computer makers fell after China's Lenovo warned of shipment ⁠pressure due to a memory-chip shortage. HP and Dell Technologies ⁠lost 5.4% and 8.6%, respectively. Declining issues outnumbered advancers by a 2.07-to-1 ratio on the New York Stock Exchange, where there were 682 new highs and 212 new lows. On the Nasdaq, 1,268 stocks rose and 3,483 fell as declining issues outnumbered advancers by a 2.75-to-1 ratio.

The S&P 500 posted 98 new 52-week ‌highs and 32 new lows while the ‌Nasdaq Composite recorded 113 new highs and 277 new lows.