Tech still steers the S&P 500 as the AI trade wobbles

The selling came to a head this week with the S&P 500 tech sector's steepest one-day fall in over six years, capping a month-long slide in AI-linked names. Investors are worried that Democratic victories in the midterm elections will cool the data-center spending binge that powered the rally. Still, tech closed Thursday as the S&P 500's dominant sector by far, at more than 35% of the index, according to Robert Pavlik, senior portfolio manager at Dakota Wealth Management, who noted AI weakness "is going to drag down tech, which drags down the S&P 500."

That weight is a souvenir of the bull market that started in October 2022: tech has climbed more than 200% since then, nearly double the S&P 500's advance. It also sits above the share of the index tech commanded at the peak of the 2000 internet bubble. Plenty of AI's muscle hides in other sectors — Alphabet, Amazon and Meta Platforms, three of the biggest data-center spenders, are classified elsewhere. Some AI stars are nursing big slides but still deep in the green for 2026: Sandisk up about 250%, Dell Technologies up about 160% and Micron Technology up 140%.

As stocks bounced Friday, the S&P 500 sat nearly 8% higher for the year, with tech up about 11%. "If somebody is in a profit-taking mode, there are still profits to be had," said Chuck Carlson, CEO at Horizon Investment Services. The drop has also made tech look cheaper on paper. Its forward price-to-earnings ratio, based on the next 12 months of estimated earnings, sank to 17.1 as of Thursday, per LSEG Datastream, after topping 32 in October 2025. The S&P 500's own multiple was 17.9 — the first time since 2017 tech has traded below the wider market.

Keith Lerner, chief investment officer at Truist Advisory Services, said the market is "arguably ... already pricing in a lot of bad news," adding in a Thursday note that "a little good news could go a long way." Several catalysts loom. Reuters reported Thursday that potential investors doubt Anthropic can run its IPO roadshow next week in time for a November listing, casting a shadow over AI sentiment. Cloud firm CoreWeave, central to AI-financing worries, reports Tuesday; Nvidia follows on November 17 and Dell on November 24.

Macro headlines could move everything. Expectations that the new Congress will end the US-Israeli war with Iran helped push oil lower this week, lifting stocks, but investors fear an escalation now that the midterms are over. They are also tracking how far the Federal Reserve will raise rates to fight inflation, with next week's Consumer Price Index report as the first test.