AI Tech Market Woes: Investors Grapple with Future of AI Trade Amid Sell-Offs

The Impact of AI on the Investment Market

The fluctuating hype surrounding AI technology has made investors apprehensive about the potential disruptive effects on businesses and the economy. This heightened concern has left many wondering where the next market panic could originate from.

AI Hysteria Rocks the Tech Sector

The tech sector is bearing the brunt of this unease, with the recent software sell-off triggered by updates from Anthropic and fears of a labor-market disaster scenario predicted by Citrini adding more fuel to the fire. Even the solid Nvidia earnings reports haven’t been able to allay investors’ anxieties about AI.

To better understand what the future holds for AI trade, Business Insider spoke with three investment professionals.

Insights from Investing Professionals

John Belton, a Gabelli portfolio manager specializing in growth names, expressed shock at the severity of the sell-off, while Daniel Newman, CEO and principal analyst at Futurum, compared the current situation to walking on a tightrope, waiting for the next shoe to drop.

Paul Meeks, Freedom Capital Markets’ head of tech research, confessed his expectations for tech outperformance in 2026 has morphed into a forecast of the sector lagging behind the broader S&P 500.

These experts offered four key takeaways from the current investment climate.

The ‘Death Bomb’ in Private Credit

The private credit space is a growing concern for investors, according to Newman. He theorizes that there is a ‘death bomb’ in private credit, citing worries around how companies like Oracle will continue to raise capital for their capex. This potential private debt could trigger a short-term slowdown.

Big Banks Aren’t Immune

While investors focus on Blue Owl and other firms’ exposure to AI, it’s essential to remember that big banks also aren’t immune to these issues. With comparisons to 2007 signaling mounting stress, Meeks warns that banks could be vulnerable to investors’ worries. In addition to private credit, banks also face potential disruption from AI.

The Rise of Physical AI

Physical AI, which involves AI systems interacting with the physical world, is anticipated to be a significant frontier for technology. With Citi projecting the total addressable market for warehouse-automation systems to reach $112 billion by 2029, physical AI presents both opportunities and threats to various sectors, according to Paul Meeks.

Software Markets Could Fall Further

Software has been one of the worst-hit areas during the recent tech sell-off. Although Newman expects a recovery, he believes it won’t be an even one as companies without a data moat or part of a larger platform face the risk of further declines.