U.S. equity markets are entering a period of heightened sensitivity as the potential for artificial intelligence to upend established business models remains at the forefront of investor concern. Market participants are looking to next week’s U.S. payrolls report for February and a handful of corporate results to better gauge how AI-driven change is filtering through the economy and company finances.
AI's disruptive promise has been cited as a central theme in recent weeks, with price pressure concentrated in sectors seen as most exposed to the technology's transformative effects. Software companies, wealth management firms and real estate services have seen particularly sharp moves as market participants debate which firms will be displaced and which will prosper by adopting AI tools.
Market context
Sentiment around AI intensified when a closely watched industry bellwether failed to ease investor nerves. Nvidia, widely seen as an AI leader, reported quarterly results that did not alleviate concerns and its shares fell more than 5% on Thursday, exerting downward pressure on the broader technology complex. One of the persistent investor questions is whether the hyperscaler customers that have poured capital into data centers and related infrastructure will realize returns sufficient to justify those large investments.
Even with technology under pressure, other corners of the market have provided some support to headline indexes. Gains in industrials and consumer staples have helped offset part of the weakness in tech, keeping major equity benchmarks from steeper declines. Nevertheless, weak performances in technology and financials pushed primary averages lower on Friday, and both the S&P 500 and the Nasdaq Composite recorded their largest monthly percentage declines in roughly a year for February. The S&P 500 remained up 0.5% year-to-date as of Friday.
"There continues to be this ... back and forth about who might be the victim and those that will actually emerge winners because they are harnessing AI as opposed to being replaced by it," said Kristina Hooper, chief market strategist at Man Group. "There is very little definitive right now about that, and so I think that will continue to be a concern."
"The U.S. equity market is sort of in its late cycle, trying to find the winners and losers of this new disruptive technology and pretty much treading water," said John Velis, Americas macro strategist at BNY.
Jobs report and rate expectations
The U.S. labor market snapshot for February, due on March 6, will likely be the most important macro release in the near term. A Reuters poll indicates the report is expected to show an increase of 60,000 payrolls, following January’s stronger-than-anticipated addition of 130,000 jobs and a decline in the unemployment rate to 4.3%.
January’s figures helped allay immediate concerns about a deteriorating labor market, but some strategists warned that a single robust month may not indicate a sustained trend. "We saw a good January jobs report, but we also have seen a really weak 2025 for the job market," Hooper said. Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest Wealth Management, expressed a similar caution, noting that the concern is whether January represented a one-off improvement.
Investors will parse the jobs data not only for wages and hiring momentum but also for indications about the Federal Reserve’s next move. Futures markets currently price the next fed funds rate reduction in June or July, a timeframe that would follow the end of Jerome Powell’s term as Fed chair in May and the potential arrival of nominated replacement Kevin Warsh. The Fed cut rates last year amid weakening employment conditions but paused easing in January, and another strong employment report could lead markets to delay expectations for subsequent rate cuts.
"The market’s reaction to the jobs data will be telling for which factors are prominent for equity investors. For example, strong data followed by weak stock performance is going to be a sign that the rate argument is important," Velis said.
Other economic releases and corporate earnings
Beyond payrolls, investors will receive a slate of monthly data including manufacturing and services sector activity, as well as January retail sales, which are also scheduled for release on March 6. These reports will offer additional colour on demand, production trends and consumer behavior early in the year.
On the corporate front, Broadcom is among the remaining large-cap companies set to report results during the coming week, with its quarterly update scheduled for Wednesday. Retailers Best Buy and Target are also expected to post quarterly numbers. These earnings reports will effectively close out the fourth-quarter reporting season and may illuminate whether AI-related investments or demand shifts are showing up in company financials.
Views from policymakers and strategists
Officials and strategists are openly debating the labor market and AI’s implications. In remarks reported this week, outgoing Atlanta Fed President Raphael Bostic said the United States could be entering a period of structurally higher unemployment as firms adopt labor-saving AI tools.
"Major technological shifts provoke both excitement and anxiety," Keith Lerner, chief investment officer at Truist Advisory Services, wrote in a research note on Thursday. "More recently... optimism has begun to give way to heightened anxiety and increasingly bleak narratives about AI’s impact on work, productivity, and economic outcomes."
These tensions - between potential productivity gains and the risk of labor displacement - are central to how investors evaluate sector prospects. Software companies remain particularly sensitive to changes in sentiment, while industrials and consumer staples have so far shown more resilience.
AI-driven stock screening product referenced by market participants
Some market participants reference AI-based stock-screener tools when weighing individual investment opportunities. One such product, ProPicks AI, claims to evaluate companies including Nvidia each month using more than 100 financial metrics and to leverage AI to generate stock ideas based on fundamentals, momentum and valuation. The product description notes it has identified past winners such as Super Micro Computer and AppLovin, and it promotes the ability to compare whether specific stocks like Nvidia are included in its strategies.
Bottom line
As the market awaits February’s payrolls and a final tranche of quarterly results, the overarching narrative is one of uncertainty about which firms will benefit from and which will be challenged by AI. Investors will be watching labor market details, Fed policy signals and corporate reports closely for clarity on that question and for cues that could tilt the balance of winners and losers across sectors.