AI Job Displacement Fears Spread as Tech Stocks Face a Double Hit

Market Overview

U.S. equities experienced sharp sector rotation yesterday as mixed economic data collided with growing concerns over AI-driven job displacement. Heavy selling in software stocks quickly spilled over into semiconductors and core AI-related names, dragging the Nasdaq Composite down 1.51%. In contrast, the Dow Jones Industrial Average rose 0.53%, supported by safe-haven flows and cyclical recovery expectations, with energy and materials stocks showing notable resilience.

At the individual stock level, the semiconductor sector suffered a severe sell-off, with the Philadelphia Semiconductor Index plunging 4.4%. AMD collapsed 17% after issuing weaker-than-expected first-quarter guidance, marking its largest single-day decline in eight years. AI data analytics firm Palantir fell 12%, while storage giant SanDisk dropped nearly 16%. In after-hours trading, Alphabet slid more than 2% amid earnings-related pressure and renewed antitrust concerns. Software stocks remained under pressure as investors reassessed the disruptive impact of AI agents on traditional software and service-based business models.

On the macro and rates front, the U.S. Treasurys quarterly refunding announcement aligned with market expectations for a “regular and predictable” issuance strategy, leaving medium- to long-term borrowing plans unchanged. The 30-year Treasury yield edged up 2 basis points to 4.92%. The U.S. dollar index rebounded 0.3%, recovering losses from the previous session.

Commodities and Cryptocurrencies:

• Metals pulled back after a rally: Spot gold briefly broke above the $5,000 level intraday but failed to hold gains as a stronger dollar weighed on prices, ending up just 0.3%. Silver extended its rally, closing up 3%.

• Crypto market sell-off: Cryptocurrencies faced widespread liquidations. Bitcoin fell more than 5% to around $72,000, while Ethereum plunged sharply, triggering a significant increase in total market liquidations.

Key Themes to Watch

● Sharp Slowdown in Employment

U.S. January ADP employment data significantly undershot expectations, showing an increase of just 22,000 jobs, highlighting fading labor market momentum at the start of the year. Job growth was entirely driven by the education and healthcare sectors, while several key industries, including professional and business services and manufacturing, saw job losses, underscoring structural weakness. Although wage growth remained steady at 4.5%, the overall softness in the data may reinforce the Federal Reserves cautious stance on the economic outlook. Meanwhile, the official nonfarm payrolls report has once again been delayed due to the government shutdown.

● U.S. January ISM Services PMI Hits a High

The U.S. January ISM Services PMI came in at 53.8, matching its highest level since October 2024 and exceeding market expectations. The improvement was supported by a rebound in business activity; however, new order growth slowed, employment showed little expansion, and the prices index climbed to a three-month high.

Events in Focus (GMT+8)

21:15 US – Initial Jobless Claims for the week ending January 31

21:15 EU – European Central Bank Interest Rate Decision

21:45 EU – ECB President Christine Lagarde Holds Monetary Policy Press Conference

23:00 US – U.S. January Global Supply Chain Pressure Index

23:50 US – 2027 FOMC Voter and Atlanta Fed President Raphael Bostic Participates in Monetary Policy Q&A Session