The prospect of AI-driven disruption has hovered over the economy for years, but new software tools unveiled this week triggered a sharp selloff on Wall Street.

Software stocks were hit by heavy selling during the week after investors realized that the threat of AI displacing existing business models has become a present reality rather than a distant risk.

While the possibility of AI disruption has long been discussed, a new wave of tools launched this week by a San Francisco startup forced Wall Street into a sudden confrontation with that reality.

Software companies most exposed to the risks from these new tools were among the hardest hit, along with investment funds that lend to them. The selling pressure also weighed on the broader market, with the S&P 500 turning negative for the year on Thursday after falling in six of the last seven sessions, before rebounding 1.5% the following day.

In recent years, artificial intelligence acted as rocket fuel for equities, pushing prices to record highs. But since October, that enthusiasm has started to fade as markets increasingly digest the practical implications of this transformative technology.

Investors are no longer only worried that AI could render some companies obsolete — they are also questioning the scale of corporate spending on it. Those concerns intensified Thursday after Amazon revealed plans to spend $200 billion this year on AI and other major investments, about $50 billion above analyst expectations, sending its stock down more than 7% on Friday.

Alphabet, Google’s parent company, said this week it may spend up to $185 billion this year, while Meta said last week its capital expenditures — largely driven by AI — could reach $135 billion.

In the software sector, the immediate trigger for this week’s selloff was Anthropic’s announcement on Tuesday of additional free software tools that allow companies to automate functions such as customer support and legal services.

Because these tools are open-source, any company can download and use them at no cost, threatening to replace paid enterprise software currently sold by other vendors.

Another area exposed to AI risk is Software-as-a-Service, or SaaS — the subscription-based model that delivers software over the internet instead of through on-premise installation. New AI-powered free software models could replace not only SaaS business models but also a large portion of the workforce built around them.

Sam Altman, CEO of OpenAI, said in an interview with the tech streaming program TBPN on Thursday: we have seen several major selloffs in SaaS stocks over the past few years as these software models were introduced, and I expect more.

Analysts have dubbed the broad selling wave the “SaaSpocalypse.”

Shares of companies such as LegalZoom, LexisNexis, and Thomson Reuters — which provide legal services and research — fell by as much as 20% over the past week, with uneven rebounds in recent sessions.

Salesforce, a major SaaS and customer-relationship-management software provider, has dropped 25% over the past month.

Even creative software firms were not spared. Shares of Adobe and Figma — both design-tool developers — fell 9% and 17% respectively during the week, amid concerns that many core design functions could be automated in the future.

AI spending pressures are not limited to software. The boom in AI investment has driven massive demand for RAM and related hardware needed to run AI systems.

Qualcomm said on Wednesday it faces uncertainty about chip demand over the next two years, partly because sharply rising memory costs could weaken consumer demand for new devices. Qualcomm shares are down about 20% this year.

Software companies have also been a preferred target for private credit lenders because subscription models provide steady income streams that can support debt loads.

While private credit deals are not publicly disclosed, loans held by business development companies, or BDCs, serve as a proxy. According to Barclays analysts, roughly half of software-sector debt held by these firms — about $45 billion — matures after 2030, raising duration and disruption risks if AI displaces borrowers before repayment.

A VanEck ETF tracking major BDC holdings is down about 5% this year and more than 20% over the past twelve months.

Even after Ares Management and Blue Owl Capital — two of the largest private credit firms — reported results widely praised by Wall Street analysts this week, their shares remained under pressure from AI disruption fears. Ares is down more than 20% this year, while Blue Owl has fallen more than 16%.

On a Thursday analyst call, Blue Owl co-CEO Marc Lipschultz strongly rejected the idea that AI threatens the firm’s lending business, saying there are no red flags — in fact not even yellow flags — mostly green flags.

CFO Alan Kirshenbaum attributed current challenges to headwinds in private credit, AI, and software, as well as investor redemptions.

Analysts were largely reassured by the company’s results. Glenn Schorr of Evercore ISI wrote that if you removed the company’s name from the top of the report and read the details, you would think it was a very strong quarter.

Bitcoin — which is heavily influenced by retail investors and often trades in line with popular equity themes — fell to around $60,000, its lowest level since October 2024, before rebounding toward $70,000.

During a congressional hearing Wednesday, Treasury Secretary Scott Bessent said the government does not have the authority to force banks to buy Bitcoin to support prices.

As investors cut exposure to more speculative bets such as AI stocks and cryptocurrencies, they are rotating into more traditional sectors viewed as more resilient during volatility.

Since the start of the year, energy, consumer staples, and materials stocks have gained more than 10%, while the technology sector has lagged.

Angelo Kourkafas, strategist at Edward Jones Asset Management, said that after years of technology leading the market, the balance of power is shifting as investors rotate toward traditional parts of the economy.

US stock indices rebounded strongly during Friday’s trading after three consecutive losing sessions, supported by renewed demand for technology shares.

Wall Street was also lifted by gains in industrial stocks, with Caterpillar rising 5.47% to $715.41, and in financial stocks, with Goldman Sachs advancing 3.35% to $920.25.

The US stock market had been under pressure due to broad selling in technology shares, especially software companies, amid concerns over rising spending by artificial intelligence firms.

In trading, the Dow Jones Industrial Average jumped 1.9%, or 913 points, to 49,822 by 16:37 GMT. The broader S&P 500 rose 1.5%, or 101 points, to 6,900, while the Nasdaq Composite gained 1.6%, or 367 points, to 22,908.

Bitcoin fell on Thursday to its lowest level since mid-October 2024, as shrinking liquidity and a broad selloff in global technology stocks renewed pressure on high-risk assets.

The world’s largest cryptocurrency was down 12.4% at $63,539.4 by 17:28 ET (22:28 GMT).

Bitcoin has declined in seven of the past eight trading sessions, losing about 50% from its record peak near $126,000 reached in October 2025.

Steve Sosnick, chief strategist at Interactive Brokers, told Investing.com that the crypto market has moved well beyond a normal cycle and is now in a full bear market, noting that declines of 40–50% or more make that difficult to dispute.

Drivers of the rally have turned into headwinds

Bitcoin’s sharp drop in recent days has coincided with a selloff in technology stocks, as investors rotate into other sectors and assets.

Sosnick said several factors that fueled Bitcoin’s strong rally in 2025 are now working in the opposite direction.

He pointed to strong capital inflows into crypto after the launch of spot Bitcoin ETFs in January 2024, a supportive stance toward digital assets from President Donald Trump’s administration, and heavy buying by digital asset treasury companies, all of which supported the surge.

He added that during the rally, crypto benefited from the absence of traditional margin constraints. While stocks and ETFs are subject to rules such as Reg T, many crypto brokers and platforms offered very high leverage, allowing investors to amplify gains.

From normal correction to sharp liquidation wave

After Bitcoin hit a record above $126,000 on October 6, cryptocurrencies entered a steep selloff just four days later.

Analysts later described the move as a flash crash tied to margin-related losses among highly leveraged traders.

Sosnick said that once momentum shifted, the same factors that boosted crypto began to weigh on it. High leverage magnifies gains on the way up but also intensifies losses on the way down. Expected crypto regulation has also stalled in Congress, while some equity-market investors have exited as momentum moved elsewhere. He noted that while ETFs made crypto exposure easy to buy, they also made it easy to sell.

He said what began as a normal correction turned into a heavy liquidation phase, similar to what has happened in other previously high-flying assets such as software stocks and precious metals.

Thin liquidity amplifies losses

Reports showed that market liquidity was notably thin, amplifying price swings and triggering a chain of forced liquidations after Bitcoin broke key technical levels.

The move accelerated as leveraged positions, especially in derivatives markets, were liquidated after Bitcoin fell below $75,000 and stop-loss orders were triggered.

According to crypto analytics firm CoinGlass, roughly $770 million in crypto positions were liquidated over the past 24 hours.

Altcoin prices today

Most alternative cryptocurrencies also declined on Thursday.

Ethereum, the second-largest cryptocurrency, fell 11.5% to $1,878.11, while XRP, the third-largest, dropped 21% to $1.19.

Oil prices held steady on Friday as investors awaited the outcome of high-stakes talks between the United States and Iran taking place in Oman, amid fears that a new Middle East conflict could disrupt supplies.

Brent crude futures rose 7 cents, or 0.1%, to $67.62 per barrel by 10:55 GMT, while US West Texas Intermediate crude gained 7 cents, or 0.1%, to $63.36 per barrel.

Despite that, Brent is heading for a weekly loss of 4.3%, while WTI is on track to finish the week little changed.

Tamas Varga, oil analyst at brokerage PVM, said investors are watching the US–Iran talks and that market sentiment is being shaped by expectations around their outcome.

He added that the market is waiting to see what these negotiations will produce.

The lack of agreement between Iran and the United States on the meeting agenda has kept investors uneasy about geopolitical risks.

Iran wants the discussions limited to nuclear issues, while the United States is pushing to also address Iran’s ballistic missile program and its support for armed groups in the region.

Any escalation between the two countries could disrupt oil flows, with about one-fifth of global consumption passing through the Strait of Hormuz between Oman and Iran.

Saudi Arabia, the UAE, Kuwait, and Iraq export most of their crude through the strait, along with Iran, an OPEC member.

If the US–Iran talks lead to a reduction in regional conflict risk, oil prices could fall further.

Capital Economics analysts said in a note that geopolitical concerns are likely to give way to weak market fundamentals, pointing to recovering oil production in Kazakhstan, which could help push prices toward about $50 per barrel by the end of 2026.

On a weekly basis, prices have been pressured by a broader market selloff and continued expectations of an oil supply surplus, according to analysts.

Saudi Arabia on Thursday cut its official selling price for Arab Light crude to Asia for March to near a five-year low, marking the fourth consecutive monthly price cut.

Varga said the underlying market backdrop is not encouraging, as it points to an oversupplied market.