（Singapore, 05.02.2026）Global financial markets were shaken this week as growing fears that artificial intelligence could upend existing business models sparked a sharp and unusually broad selloff.
In just a few days, hundreds of billions of dollars were erased from the value of technology stocks, credit markets and commodities. What began as a decline in software shares quickly spread across regions and asset classes, dragging down Asian equities, precious metals and even cryptocurrencies.
Market observers say the speed and scope of the selloff reflect a major shift in sentiment. After years of excitement about AI-driven growth, investors are now confronting the possibility that the technology may destroy value for many companies faster than it creates new opportunities.
AI-driven volatility has appeared several times since ChatGPT entered the mainstream three years ago. But this episode stands out. Over a two-day period, stocks, bonds and loans linked to technology firms — from large-cap leaders to smaller players — suffered steep losses. Software stocks were hit hardest, with an exchange-traded fund tracking the sector losing close to US$1 trillion in market value over the past week.
This time, the trigger was not fear of a speculative bubble, but concern that AI tools are becoming capable enough to replace core services provided by many white-collar businesses.
Michael O’Rourke, chief market strategist at JonesTrading, told Bloomberg the market reaction marks a turning point, as investors begin to witness AI’s real-world applications reshaping entire industries after years of anticipation.
From AI Breakthroughs to Investor Panic
The immediate spark came from a low-key announcement by AI startup Anthropic, which introduced a new tool aimed at legal work such as contract review. While the product itself was not viewed as revolutionary, the timing was critical.
Over the past year, Anthropic’s AI coding tools have already transformed parts of the software development process. Against that backdrop, investors took the announcement as a signal that AI is rapidly moving into professional services once thought to be relatively safe.
Analysts warned that legal services may only be the beginning. If AI can reliably handle tasks in law, it could soon expand into sales, marketing, finance and other corporate functions. That fear quickly rippled through markets.
Adding to the unease, even companies seen as key beneficiaries of the AI boom showed signs of strain. Alphabet said it expects capital expenditure on AI infrastructure to jump to between US$175 billion and US$185 billion this year, far exceeding expectations. While spending underscores AI’s importance, it also raised concerns about soaring costs and uncertain returns.
Meanwhile, chip designer Arm Holdings issued a revenue outlook that disappointed investors, sending its shares lower along with those of its majority owner, SoftBank Group. In the United States, weak earnings from Advanced Micro Devices further dampened sentiment, with the stock suffering a sharp overnight drop.
As selling intensified, investors moved beyond software stocks and began unloading anything linked to the AI ecosystem. According to market participants, falling prices have fed negative momentum, prompted more selling and widening the downturn.
The impact quickly went globally. Shares of major IT services firms such as Tata Consultancy Services and Infosys fell on fears that AI could threaten traditional outsourcing models. In Europe, London Stock Exchange Group also declined.
Asian markets bore the brunt of the fallout on Thursday. South Korea’s benchmark index dropped sharply after losses in Samsung Electronics, while Taiwan’s tech-heavy market also slid. Japan’s Nikkei fell despite gains in defensive sectors such as healthcare and utilities.
U.S. stock futures attempted a modest rebound during Asian trading hours but soon lost steam, underscoring fragile investor confidence.
As technology stocks fell out of favour, investors rotated into defensive names such as Walmart, driven by concerns that AI could disrupt jobs and consumer spending. Risk assets elsewhere also suffered. Bitcoin fell to its lowest level since late 2024, while government bond yields edged lower as investors sought safety.
The gloomy mood extended to commodities. Precious metals suffered another sharp selloff, with silver plunging more than 15% and gold also retreating amid volatile trading. The decline erased a brief rebound following last week’s historic rout, which ended a speculative rally driven by geopolitical tensions and worries over central bank independence.
Analysts said fragile sentiment and thin liquidity have amplified market moves, creating a feedback loop as investors rush to cut exposure. While some believe the longer-term case for precious metals remains intact, volatility is expected to persist until there is greater clarity on monetary policy.
For now, investors are reassessing the AI landscape more critically. The question is no longer just who benefits from AI, but who risks being left behind.
As one fund manager noted, markets may be entering the early stages of a major repricing, as companies, sectors and entire business models are judged on how well they can survive and adapt in an AI-driven world.
