MW Investors were braced for an AI fallout - just not this one, popular strategist says.
By Barbara Kollmeyer
Nomura strategist says second-order AI disruption worries have arrived early
Anthropic has set investors on edge for an AI fear they weren't expecting.
Alphabet earnings are the headliner for later, but for now, investors continue to weigh up the fallout for embattled software stocks after Anthropic's "Cowork" bombshell.
Tuesday saw the iShares Expanded Tech-Software Sector ETF IGV slide 4.6%, the second-biggest one-day percentage drop since last April.
Our call of the day from Charlie McElligott, Nomura's widely respected cross-asset strategist, says investors had been ready for AI headwinds this year, but instead are facing a second-order one that wasn't expected for awhile.
McElligott explains that headed into 2026, markets were braced for "slow bleed" headwinds like AI hyperscalers burning through cash, either denting stock buybacks or worrying the bond market that has to fund it.
"But instead of said hyperscaler slow burn, it's zoom to the second-order impact of 'AI disruption' already hitting bottom lines." That not just hit software firms in the legal space but spread to financial services and even asset managers.
And an "absolutely tectonic meltdown" for those "expensive" software/SaaS players - highly valued by markets for both their high growth and their fat margins- has meant the credit worries are moving onto the companies that lent those software companies money, he said.
That's as the fintech/consumer finance space is "also being exposed to its own 'AI disruption anxiety,'" he said.
Investors are now rapidly rotating out of those legacy growth stocks into what's considered cheaper stocks, such as defensives and cyclicals, he said.
Appetite in recent months has been growing for real assets such as precious metals and real estate versus those connected to the dollar because of wariness over U.S. deficits and more potential dollar weakening.
"If the nature of the business you're in is selling digital goods and services as the 'profit model' (SaaS and BITCOIN even, lol) vs selling 'real things,' you're getting cooked on the Anthropic / 'AI disruption' implication fears hitting meaningfully ahead of schedule, i.e. Anthropic /Clawdbot almost single-handedly launching the software sector into oblivion in recent weeks," he said.
The latest bout of AI-related jitters for software stocks come as investors watch OpenAI and its "wildly lumpy financing needs in the few months ahead, which are being watched like a hawk by market participants," said McElligott. That could prove another big moment for markets, he said.
Last word goes to Mike O'Rourke, chief market technician at Jones Trading, who notes there's a paradox in that the major clients of the hyperscalers are the cloud software companies.
"If they were all set to disappear, so would much of the intermediate-term compute demand that is anticipated. Although we don't have Sam Altman's vision, we suspect the truth lies somewhere in between."
The markets
U.S. stock futures (ES00) (YM00) (NQ00) are modestly higher. Gold (GC00) and silver (SI00) are again rising, with the yellow metal reclaiming the $5,000 level.
Key asset performance Last 5d 1m YTD 1y S&P 500 6917.81 -0.87% -0.39% 1.06% 14.57% Nasdaq Composite 23,255.19 -2.36% -1.24% 0.06% 18.32% 10-year Treasury 4.283 3.70 12.40 11.10 -14.90 Gold 5113 -1.27% 13.48% 18.02% 77.89% Oil 63.33 1.21% 11.16% 10.31% -12.92% Data: MarketWatch. Treasury yields change expressed in basis points
The buzz
Alphabet $(GOOGL)$ will headline earnings after the close, Qualcomm $(QCOM)$, Snap (SNAP) and Arm Holdings $(ARM)$ also reporting.
Eli Lilly stock $(LLY)$ is soaring on strong earnings from the pharmaceutical giant.
Chipotle stock $(CMG)$ is dropping after a flat same-store sales outlook that casts doubt on a restaurant recovery this year.
Super Micro Computer shares CA:SMCI are surging after the computer hardware maker reported record revenue over AI demand.
Match Group $(MTCH)$ beat profit and revenue forecasts and shares of the online dating service are up.
Take-Two Interactive Software (TTWO) narrowed losses and reported higher sales, with stock in the videogame group rising.
Private-sector payrolls for January are due at 8:15 a.m. The Institute for Supply Management's services index for January is due at 10 a.m.
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The chart
The chart from Mark Newton, head of technical strategy at Fundstrat, shows the Invesco Energy ETF RSPG energy breaking out versus the equal-weight Invesco S&P 500 ETF RSP. Crude (CL00) gains have driven the breakout, while options markets aren't ruling out rising U.S.-Iran tensions in coming weeks, Newton said. Therefore "the next few weeks might show further near-term strength, which looks important not to ignore," he said, flagging ETFs such as VanEck Oil Services ETF OIH, State Street SPDR S&P Oil & Gas Exploration & Production ETF XOP and the State Street Energy Select Sector SPDR ETF XLE.
Top tickers
These were the top-searched tickers on MarketWatch as of 6 a.m.:
Ticker Security name NVDA Nvidia TSLA Tesla AMD Advanced Micro Devices GME GameStop INFY Infosys MSFT Microsoft PLTR Palantir NVO Novo Nordisk SMCI Super Micro AAPL Apple
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(END) Dow Jones Newswires
February 04, 2026 07:24 ET (12:24 GMT)
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