By Jack Pitcher, Sam Goldfarb and Xavier Martinez
The S&P 500 is clinging to an unremarkable yearly gain, up less than 1% in 2026. But at the single-stock level, swings have been violent.
Microsoft has slumped 18% this year, shedding well over half a trillion dollars in market value. TurboTax maker Intuit has lost 37%. Shares of the memory-chip manufacturer Sandisk have nearly tripled, meanwhile, while Texas Pacific Land, a real-estate company that has become a data-center play, is up 85%.
Investors are still piling into the shares of chip makers and other companies at the heart of the artificial-intelligence infrastructure build-out. But the largest tech companies have lost momentum, and investors fearing AI disruptions are rotating into sectors that have languished, such as energy and materials.
While the S&P 500 has traded within a range of just 2.7% in 2026, the average company in the index has moved within a band that is about seven times as much, according to Barclays data through Feb. 13. That ratio is the largest since at least 1994, signaling a market with unusually high divergence in returns between different companies.
The violence of the underlying moves makes some nervous, because periods of what Wall Street calls "dispersion" have sometimes preceded market corrections. It also offers opportunity for stock pickers hoping to outperform benchmark indexes.
"This is a really dynamic environment," said Jonathan Cofsky, a tech equity portfolio manager at Janus Henderson Investors. "AI is moving so quickly and the improvements have been nonlinear. Investors are having a hard time figuring out what that means for a lot of different stocks."
For years, the rapid growth of AI has been a tailwind for stocks, propelling the S&P 500 to double-digit returns in 2023, 2024 and 2025 following OpenAI's release of ChatGPT in late 2022.
Late last year, there were already signs of a shift, with investors punishing companies like Oracle on fears they were spending too much on AI. But that was still nothing compared with what has happened this year, as investors have increasingly focused on the potential downsides of AI adoption.
The software sector lies at the center of their concerns. Rattled by the emergence of " vibe coding," shares of software heavyweights such as Salesforce and ServiceNow had already declined last year. But they started plunging in January, as companies like Anthropic and OpenAI rolled out new tools that industry insiders say can significantly shrink the time it takes to build even complex software.
Despite little evidence that AI is hurting the earnings of software companies now, the pace of change is such that investors are selling first and asking questions later. Fears of AI disruption have moved beyond software to insurance and asset-management firms.
At one point, transport stocks had one of their worst days ever after a onetime karaoke machine-maker touted new AI tools to streamline trucking. Another day, stocks fell broadly, seemingly in response to a viral Substack post that painted a dark future in which AI decimated white-collar knowledge work.
Those declines were outliers, however. For now at least, the sharp drop in certain stocks has often been matched by equally large gains elsewhere, with investors still generally optimistic about the general direction of corporate profits and the U.S. economy.
Concerning to some, the current level of single-stock dispersion is reminiscent of earlier stock-market booms that were followed by busts -- most notably the dot-com bubble of the late 1990s.
Stefano Pascale, an equity derivatives strategist at Barclays, said the comparison to the 1990s is relevant, because then, as now, the economy was experiencing rapid technological change. "Dispersion is a signature of such periods of high innovation," he said, as investors try to sort out winners and losers without much information to go by.
Nevertheless, he said, that doesn't mean that stock indexes now are poised for major losses, noting that valuations were "a lot higher" in the 1990s than today.
Some investors say they are embracing the current market.
"I think it's an opportunity like we have not seen in several years to buy software stock," said Jamie Cox, managing partner at Harris Financial Group. Cox's income-oriented, dividend-focused holdings have had a strong year.
Kieran Osborne, who oversees $14.5 billion as chief investment officer and partner at Mission Wealth, echoed that sentiment, arguing that "those that may actually benefit significantly from AI adoption have been lumped in with everybody else."
Still, with opportunity comes risk and anxiety. Alex Chaloff, the chief investment officer of Bernstein Private Wealth Management, said his team has been trying to sort out AI winners from losers since last year.
Clients have been calling more often, he said.
"We get a lot of questions like, 'I've owned XYZ company forever and it's done great. Is that over? Should I get out?'" Chaloff said.
Write to Jack Pitcher at jack.pitcher@wsj.com, Sam Goldfarb at sam.goldfarb@wsj.com and Xavier Martinez at xavier.martinez@wsj.com
(END) Dow Jones Newswires
March 02, 2026 20:00 ET (01:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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