Dow drops 669 as AI angst rattles Wall Street
U.S. stocks fell hard Thursday, Feb. 12, 2026 (ET), as a fresh wave of anxiety over which businesses could be disrupted by artificial intelligence triggered a broad selloff that hit software and select tech hardware especially hard.
Blue chips, S&P 500 and Nasdaq retreat together
The Dow Jones Industrial Average sank 669 points, a decline of 1.3%, while the S&P 500 lost 1.6% in one of its sharpest down days since late November. The Nasdaq Composite fell 2%, underperforming as investors rotated away from names seen as vulnerable to AI-driven shifts in spending and internet use. Even with the pullback, the S&P 500 remains not far from its late-January record, underscoring how strong the multi-month rally has been ahead of this bout of profit-taking.
AI “losers” trade pressures software and networking
Software shares absorbed the brunt of the selling. AppLovin tumbled nearly 20% despite posting stronger-than-expected quarterly profit, as investors questioned whether its advertising and app-monetization tools could face pressure if AI reshapes user behavior and the broader digital ad market. Management emphasized that operating trends remain solid, but sentiment ruled the day and the stock extended what has been a rough start to the year.
Hardware linked to enterprise spending also felt the heat. Cisco slid more than 12% after signaling margins could be lighter this quarter than in the prior period. Traders read that as a sign the cost of key components—particularly memory used in AI-accelerated infrastructure—may be rising as demand tightens supplies. The move added to the theme that AI’s near-term winners and losers are diverging, with suppliers to data center buildouts on firmer footing than legacy or transitional platforms.
Credit market nerves rise alongside AI disruption risk
Beyond equities, fixed-income strategists flagged a growing risk that AI disruption could pressure parts of the corporate bond market over time, particularly lower-rated issuers. The concern is that if revenue models are upended or competitive dynamics shift faster than expected, defaults could rise in speculative-grade credit. That dynamic, in turn, can lift borrowing costs more broadly, even for well-capitalized firms—including megacaps—that are funding massive AI investments. In a harsher scenario, tighter credit could undercut capital spending plans and cool the very AI boom that has fueled market leadership over the past year.
Not all AI exposure is equal: data centers shine
There were pockets of green tied to the physical backbone of AI. Equinix jumped roughly 10% after outlining an outlook for 2026 that topped Wall Street’s expectations. The data center operator pointed to strong demand from customers with large-scale AI budgets, reinforcing the view that landlords providing power-dense capacity are benefiting as training and inference workloads proliferate. The split-screen session—software weakness alongside infrastructure strength—highlighted how investors are sifting carefully through the AI value chain for durable earnings power.
What the pullback means for the rally
Thursday’s setback comes after a powerful advance that left major indexes stretched and leadership concentrated. In dow jones stock markets trading at the close, the blue-chip gauge’s decline still left it within reach of recent highs, suggesting the move was more rotation than panic. With earnings season in full swing, guidance around AI spending, component costs, and the pace of monetization is acting as the catalyst for sharper single-stock moves. The next phase of the rally will likely hinge on whether companies can demonstrate productivity gains and margin resilience that justify elevated valuations tied to AI narratives.
What to watch next
Investors will be alert to additional results from software vendors and networking suppliers for signs that cautious commentary spreads—or stabilizes. Any shifts in pricing for memory and other AI-critical components could ripple through hardware margins into spring. On the macro side, credit spreads and new-issue activity offer an early read on whether funding conditions tighten in response to rising disruption risk. For now, the market is recalibrating expectations rather than abandoning the AI theme that has dominated the past year.
