U.S. stock markets experienced a decline on Monday, primarily driven by new tariff announcements and growing concerns surrounding the software sector's exposure to artificial intelligence (AI) risks. President Donald Trump's recent declaration of a 15% global tariff added to existing trade policy uncertainties, contributing to investor apprehension. This development followed a Supreme Court ruling that invalidated many of Trump's previous tariffs, further complicating the trade landscape.
Major stock indexes saw substantial losses, with the Dow Jones Industrial Average dropping over 800 points, equivalent to a 1.67% decrease. The S&P 500 and Nasdaq composite also fell by 1.18% and 1.32%, respectively. The iShares Expanded Tech-Software Sector ETF, a key indicator for software stocks, plunged nearly 30% in 2026 alone and continued its downward trend, falling 5% on Monday.
Investor sentiment towards the software sector was particularly negative, driven by a downgrade of Salesforce stock and discussions surrounding a potential "AI bubble." Analysts at Citrini Research warned that the AI boom might lead to a recession and a stock market crash in the coming years. Concerns were raised about ongoing capital expenditure on AI data centers amid uncertain monetization prospects.
Market strategists noted a significant withdrawal of hedge funds from equities, marking the fastest net sales since last March. This hesitance reflects a broader skepticism regarding AI's long-term viability. As investors await key earnings reports, particularly from Nvidia and Salesforce later this week, attention remains focused on how these developments may shape the market landscape moving forward.