Late at night, a market-wide plunge! "Super Storm" strikes unexpectedly!

“AI Super Storm” Strikes the U.S. Stock Market

Due to a dual impact of AI (Artificial Intelligence) panic trading and the rekindling of tariff war risks, the U.S. stock market plummeted overnight, with the Dow dropping over 821 points, and the Nasdaq and S&P 500 indices falling more than 1%. Most large tech stocks closed lower, software stocks faced heavy selling again, and the VIX fear index surged over 10%.

Goldman Sachs’s latest data shows that institutional investors are selling U.S. stocks at the fastest pace in four years and buying downside protection. The one-month options skewness on the S&P 500 has risen to its steepest level in four years, driven by expensive downside put options and cheap upside call options.

Widespread Decline

On the evening of February 23 Beijing time, after the U.S. stock market opened, all three major indices sharply declined. By the close, the Dow fell over 821 points, down 1.66%; the Nasdaq dropped 1.13%; and the S&P 500 declined 1.04%.

Most large tech stocks in the U.S. market declined, with Microsoft dropping over 3%, Amazon, Meta, and Tesla falling more than 2%, and Google down over 1%. Nvidia, which is set to release earnings this week, rose 0.91%, and Apple increased 0.6%.

Analysts pointed out that Monday’s U.S. stock market experienced a “wave of AI shocks” and the rekindling of tariff war risks, leading to renewed heavy selling in financial and software stocks.

On the news front, AI startup Anthropic announced the launch of its Claude Code product, which introduces new programming features that automate most research and analysis work for the COBOL programming language, raising concerns about IBM’s mainframe business prospects. IBM’s stock price plummeted over 13% on Monday, marking its largest single-day decline in over 25 years, with a total drop of 27% so far in February, potentially the worst monthly decline in decades.

Other software stocks also suffered heavy losses, with the software ETF IGV falling nearly 5%, continuing to hit a two-year low and likely to record its worst monthly performance since 2008. Among them, Applovin and CrowdStrike dropped over 9%, Oracle fell over 4%, and C3.ai and Palantir declined over 3%.

Additionally, an article titled “The Intelligent Crisis of 2028” spread wildly in the U.S. stock market, further fueling investor fears. The article, based on a macro research report published in June 2028, speculates on the impact of AI technological advances and the proliferation of intelligent agents on society and the economy.

The article presents a fictional hypothesis: that AI repeatedly surpasses optimistic expectations, which does not necessarily benefit assets and the economy. Instead, abundant machine intelligence could squeeze labor income and consumption cycles, triggering demand contraction and financial re-pricing driven by a “productivity boom.”

By the close of the U.S. stock market, the stocks mentioned in the article generally declined. Notably, food delivery platform DoorDash, Blackstone, and American Express fell over 6%, with Uber and Visa also dropping.

In response, JonesTrading Chief Market Strategist Michael O’Rourke said, “This is a shocking market reaction. In the face of real negative news, I’ve seen this market show remarkable resilience; but now, a completely fictional piece has directly sent the market into a free fall.”

Regarding tariffs, after most global tariff policies were overturned by the Supreme Court last year, the risk of the U.S. President Trump reigniting a trade war has sharply increased. Trump warned on Monday that any country attempting to “play tricks” with the Supreme Court ruling would face higher tariffs and more severe consequences. Nevertheless, the EU has decided to suspend approval of the U.S.-Europe trade agreement, adding uncertainty to U.S.-EU economic relations.

As a result, international gold and silver prices surged. Spot gold rose 2.38%, COMEX gold futures increased 3.31%, spot silver jumped 3.99%, and COMEX silver futures soared 7.26%.

The market’s next focus will be on Tuesday evening (early morning of February 25 Beijing time), when Trump will deliver his annual State of the Union address to Congress.

Goldman Sachs Sudden Warning

Goldman Sachs data indicates that the U.S. stock market is currently in an abnormal divergence phase of “extreme calm in indices but violent volatility in individual stocks.” Despite the low levels of the VIX index, institutional investors are selling U.S. stocks at the fastest pace in four years and buying downside protection.

In a recent report, Goldman Sachs trader Brian Garrett pointed out that recent institutional activities include selling, shorting, reducing overall exposure, and net exposure—showing defensive behavior that “more resembles a VIX level of around 35.” The one-month options skewness on the S&P 500 has risen to its steepest level in four years, driven by expensive downside put options and cheap upside call options.

A Goldman Sachs trader said, “We still haven’t seen demand for S&P 500 call options in the trading floor.”

Data shows that long-term asset managers sold a net $4 billion last week and a total of $10 billion so far this month. Hedge funds have been net sellers of U.S. stocks for three out of four weeks through their prime brokers, with 70% of net sales concentrated in the technology, media, and telecommunications sectors. Sector-wise, there is a clear divergence: funds are heavily selling software and internet stocks while buying semiconductors and storage chip stocks.

Garrett noted that this is one of the largest monthly selling tendencies by asset managers and pure long-only funds in four years, with other major sell-off months occurring in August 2022 ($18 billion), March 2024 ($14 billion), and March 2025 ($22 billion).

Analysts suggest that the U.S. stock market is approaching a critical test. Global AI leader Nvidia will release earnings after the market closes on Wednesday, which could serve as a catalyst for a directional breakout in the market.