US technology stocks tumbled Friday, heading toward their worst monthly performance in nearly a year as investor anxiety about artificial intelligence’s economic impact combined with escalating US-Iran military tensions to trigger a broad retreat from risky assets.
The Nasdaq Composite fell 1.1% shortly after market open, pushing February losses to approximately 3.5% and putting the tech-heavy index on track for its worst week since March 2025, when it shed 8% as President Donald Trump’s tariff threats roiled markets. The broader S&P 500 declined 0.8% as investors fled to the safety of US government bonds.
AI Job Displacement Narrative Drives Market Pessimism
Stocks have been battered throughout February by mounting concerns that artificial intelligence will rapidly disrupt entire industries, including software, insurance and wealth management, potentially eliminating millions of white-collar jobs and triggering economic dislocation. Bank of America analysts noted the sell-off had been “driven by a bearish narrative that AI would eliminate most white-collar jobs and eventually lead the economy into collapse.” While they characterised this narrative as “at odds with sound economic theory”, they acknowledged that “crowded positioning” in technology stocks was amplifying price movements.
Tech equities also faced pressure from persistent doubts about massive corporate AI infrastructure spending and questions about when those investments will generate returns. Nvidia’s earnings earlier this week showed stronger-than-expected revenues and blockbuster profits, yet the report failed to reassure broadly nervous investors. The chipmaker’s shares fell 2.3% Friday, adding to a 5.5% decline Thursday.
Rushabh Amin, fund manager at Allspring Global Investments, said “capex intensity is under scrutiny” and “earnings are no longer being rewarded as they were”, with investors demanding that technology company spending translate into improved profit margins before valuating companies more generously. Investor concerns about potential US military strikes on Iran further dented risk appetite, contributing to equity declines as Brent crude oil jumped more than 3% to $72.90 per barrel.
Treasuries Rally Despite Inflation Pressures
US government bonds rallied sharply as investors sought safe havens, with the 10-year Treasury yield falling 0.04 percentage points to 3.98%—dropping below 4% for the first time since November. Bond yields move inversely to prices, so the decline reflects strong buying demand.
“When the going gets tough and investors need liquidity and safety against risk, the asset that performs best is US Treasuries,” said Edward Al-Hussainy, portfolio manager at Columbia Threadneedle. Friday’s move extended broader Treasury gains that have put government bonds on track for their best monthly performance in a year despite signs of persistent inflation.
Nicolas Trindade, senior portfolio manager at BNP Paribas Asset Management, attributed the sweeping risk-off move to “private credit worries and AI job displacement fears across many industries.” Producer price data released Friday showed a sharper than expected increase, providing fresh evidence of growing price pressures in the US economy. In response, traders in futures markets pushed back expectations for Federal Reserve rate cuts, with the first quarter-point reduction now priced for September rather than July.
When Fear of Progress Becomes Market Reality
The February tech selloff reveals a fascinating paradox: investors are simultaneously worried that AI will be too successful (displacing millions of jobs and cratering the economy) and not successful enough (justifying the massive infrastructure spending). Both narratives can’t be simultaneously true, yet both are driving selling. The reality is that markets became dangerously crowded in AI-linked stocks trading at extreme valuations, making any negative catalyst—whether legitimate concerns about returns on capital or speculative fears about job displacement—sufficient to trigger deleveraging. What’s notable is how quickly sentiment can flip from euphoria to panic when positioning becomes one-sided, a dynamic crypto investors know intimately from cycles where Bitcoin narratives swing from “digital gold” to “worthless speculation” based more on price action than on fundamental changes.
