Why did AI 'science fiction' spur market panic? We asked a behavioral-finance expert to find out.

MW Why did AI 'science fiction' spur market panic? We asked a behavioral-finance expert to find out.

By Christine Ji

'It was simply hysteria': Amid high AI valuations and fears of software displacement, a blog post from Citrini Research ignited a selloff as investors tried to front-run the exit

The iShares Expanded Tech-Software Sector ETF plunged nearly 5% on Monday, far outpacing the broader S&P 500's modest 1% decline.

It was a hypothetical sci-fi thought exercise, but investors took it literally. On Monday, over $200 billion of market capitalization was wiped out of software stocks as the market reacted to a hypothetical artificial-intelligence doomsday scenario.

In a Substack post titled "The Global Intelligence Crisis," Citrini Research and Lotus Technology Management managing partner Alap Shah outlined a future where artificial intelligence largely replaces knowledge work, resulting in booming GDP growth on paper while the real-world consumer economy crumbles by 2028.

The post name-dropped enterprise software stocks - Monday.com $(MNDY)$, Asana $(ASAN)$ and ServiceNow (NOW) - which would be devastated by shrinking seats and increasing AI-native competition. Shares of Doordash (DASH) would tank as AI agents order food for consumers. Visa (V) and Mastercard $(MA)$ would be relics of the past as AI agents adopt stablecoin infrastructure. In the real world, shares of these companies all plunged on Monday before regaining some lost ground on Tuesday.

"Yesterday was one of the more cinema-driven trades I've ever seen in my career," according to Matt Stucky, chief portfolio manager of equities at Northwestern Mutual. "I can't recall a piece of science fiction that was written in a blog post that explicitly said, 'This is a scenario, not a forecast' that caused as much volatility on a single-stock basis as what we saw yesterday."

See more: Did a blog post just cause software stocks to lose more than $200 billion in market cap?

The iShares Expanded Tech-Software Sector ETF IGV dropped roughly 5% on Monday, but the overall S&P 500 Index SPX only dropped 1%, highlighting the concentrated jitters in AI-exposed stocks.

Monday's selloff was less about the blog post and more about the "positioning and narrative tension that was already in the market," according to Brad Gastwirth, global head of research and market intelligence at Circular Technologies. Software and AI names had become crowded trades, with their valuations pricing in a yearslong runway of growth. With those names priced to perfection, investors may be looking for avenues to take profits and exit positions.

In this situation, "it does not take much to trigger volatility," Gastwirth told MarketWatch in an email. Investors "are acutely sensitive to anything that challenges the durability of earnings or the pace of AI monetization."

Psychologically, investors defaulted to panic-selling following the publication of the report, according to Dan Geller, a behavioral economist and president of financial modeling firm Analyticom. "It was simply hysteria," Geller said. When investors saw the perceived danger outlined in Citrini's 2028 predictions, anxiety overpowered more rational decision-making and spread throughout the market.

"I don't blame the authors of the report. They got the publicity they wanted," Geller added. "The unfortunate part is that the retail investors are paying the price for that."

The selloff may have been exacerbated by a domino effect of investors trying to front-run selling their shares, in Gastwirth's opinion. Even if investors don't believe the Citrini report is true, they may try to exit their positions if they anticipate that other market participants will sell and send shares tumbling. "It becomes less about whether the thesis is correct and more about risk management in the short term," Gastwirth said. Investors may have been scrambling to be the first to offload shares ahead of what they saw as a fresh catalyst for a selloff.

Read: There's another AI-doom post doing the rounds. This time, the S&P 500 dives nearly 40%.

The outcomes outlined by Citrini are highly unlikely, according to Gastwirth. Physical infrastructure such as computing and power remain gating factors to the development of AI, and adoption of enterprise technology is a very slow process. A mass white-collar unemployment event by 2028 would require unprecedented technological advancements and political inaction, Gastwirth said.

However, in a market where a viral blog post can wreak havoc, the burden falls on management teams to counter the AI doom by sending clear messaging about their AI strategy. "They're trying to disprove a negative in terms of their operations," Stucky said of the affected companies. "The ability for them to to do that is going to be difficult. "

When shares of a company are in a consistent decline, the bar for investors to buy the dip is higher than if the stock has been trending upward for a while, according to Stucky. Especially for software stocks, which have been battered by new product announcements from Anthropic, the prolonged selloff has created extremely depressed sentiment for the sector.

Yesterday's selloff is a signal that "messaging from management teams needs to get a little sharper" if these companies are to buck the AI doom thesis, Stucky added.

-Christine Ji

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February 24, 2026 17:55 ET (22:55 GMT)

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