Tech confidence is fading. What might trigger a broader market reset?

ANTHONY SAGLIMBENE – CHIEF MARKET STRATEGIST, AMERIPRISE FINANCIAL

WEEKLY MARKET PERSPECTIVES — MARCH 2, 2026

Tech confidence is fading. What might trigger a broader market reset?

Putting aside Middle East developments for a moment, market sentiment around AI spending, broader disruption fears from the technology and tie-ins to private markets around these factors continue to act as a wet blanket on broader averages. Not even positive earnings reports and outlooks from NVIDIA and Salesforce last week, or Amazon’s $50 billion investment into OpenAI, boosting the value of the privately held ChatGPT creator to $730 billion (up from $500 billion in October), were enough to shake investors’ sour mood on Tech. As such, investors appear more inclined to gravitate toward views pointing to potential worst-case AI scenarios for markets and the economy, which is causing significant churn beneath broader averages that continue to hold near highs. With that backdrop in mind, below is what we believe is a more sober assessment of some of the near-to-intermediate-term risks to AI, Big Tech, and broader markets that could stall the AI trade further but are unlikely to derail the longer-term opportunities across Tech.       

• Overhyped Earnings & Valuations: As we have noted for some time, elevated valuations across AI-driven stocks leave little room for error at this point, despite still strong profit growth. Any earnings miss or a slowdown in growth relative to expectations could quickly erode investor confidence. For example, Microsoft’s Azure cloud growth decelerated slightly in the previous quarter, and margins fell as AI investments surged, triggering a sharp drop in the stock price despite otherwise solid results. The muted stock reaction to Salesforce’s solid results last week is another case in point. Such disappointments, if compounded across other tech companies, where expectations remain priced for perfection, could spark a broader selloff.
• Potential Overinvestment & Profit Squeezes: Big Tech giants are pouring unprecedented capital into AI. The largest hyperscalers plan to spend well over $600 billion in AI-related capex this year, a spend rivaling some nations’ budgets. This “AI arms race” boosts suppliers' profits today but could raise risks down the road if AI demand or returns on investment underwhelm. Thus, heavy spending could ultimately pinch margins more than expected, while the cost of AI buildouts increases unabated for a time. In an environment where AI costs are rising and margins are falling, the risk of declining stock prices rises.
• Potential Regulatory & Confidence Shocks: Sudden policy moves could deflate the AI boom. Possible triggers include stricter AI regulations (e.g., limits on data use or algorithmic accountability) that raise compliance costs, or antitrust actions that curb big players’ AI dominance. Likewise, an AI-related crisis, like a high-profile safety failure or data mishap, could quickly erode public trust and invite further regulatory scrutiny, abruptly tempering the market’s enthusiasm. Here, a more entrenched distrust of AI capabilities, or rising concerns about stricter regulation, could seriously temper AI enthusiasm.
• Macroeconomic Shift: A change in the economic backdrop can unexpectedly deflate stock momentum broadly, even across secular trends such as AI. For example, rising interest rates or a sustainable uptick in inflation could make richly valued AI stocks less attractive by raising the cost of capital and favoring safe-haven and defensive assets. Similarly, if economic growth slows more than expected, companies may trim discretionary spending on AI projects and IT, undermining the bullish revenue assumptions baked into many AI-driven stock prices.

Notably, we believe an AI sector pullback (under some of the conditions outlined above) would likely pressure earnings on multiple fronts. For example, companies that spent large sums of cash could face aggressive investor demands to quickly trim costs and improve free cash flow. And those whose business models are challenged by AI will be expected to adapt or shrink, potentially disrupting overall market momentum. Importantly, the exuberance that forgave short-term profit sacrifices over the last few years could evaporate, bringing a more unforgiving focus on quarterly results. In our view, there are already signs of this happening across Tech, as evidenced by underwhelming stock reactions following still-solid earnings reports over the last two seasons.

Additionally, under a much more extreme scenario than highlighted here, potential write-downs or project cancellations as companies admit that some AI initiatives won’t pan out as hoped would likely be greeted very poorly by the market, and analogous to the dotcom era, when telecoms wrote off fiber-optic investments. To be clear, this is not the environment we're in today, but it’s worth mentioning the point in a more bearish scenario. Conversely, companies that employed AI pragmatically, enhancing productivity without the need for unfettered spending, could shine in a more discriminating environment, as their return on investment becomes more valuable amid lowered expectations. Much like after the dotcom bust, when surviving internet companies finally became profitable, a more rational AI market would refocus on sustainability and cash generation, separating hope for the future from the reality of the day.

However, in a more likely downturn scenario over the next 6-12 months, we believe the AI trade would look less like a rupture and more like a healthy re-anchoring to fundamentals. As such, a more meaningful downturn in Tech (outside of what has already occurred in Software) might see investors increasingly gravitate toward companies with durable AI advantages, strong balance sheets, and credible monetization pathways. In that environment, we believe multiples can compress without the long-run opportunity disappearing. Seasoned investors often use dislocations to accumulate category leaders once prices stabilize, while weaker players struggle to regain peak valuations. We may already be seeing early signs of a market reset with an “orderly” rotation out of very crowded large-cap tech exposure and into the broader market areas. Of course, further weakness in Tech may precipitate a broader market selloff at some point, say a temporary 10%-15% drawdown in the S&P 500, which, admittedly, could feel uncomfortable for a period. But for the time being, renewed interest in Consumer Staples and Utilities, alongside non-tech cyclicals such as Industrials, Materials, and Energy, and international stocks, suggests that investors are still seeking opportunities where earnings and balance-sheet strength are visible, rather than running toward cash in fear.

Bottom line: The AI narrative has been a strong tailwind for U.S. stocks for many quarters and is currently going through a period in which disruption fears and spending and profit concerns among the Tech sphere have grown. However, a little doubt and worry, and maybe lower stock prices for a period, can be healthy after the run some of these stocks have seen. Frankly, it’s a normal part of the cycle during periods of rapid technological advancement. Thus, we believe it’s important to maintain a sober assessment in advance of what can go right and wrong during these historic market periods, which we believe can help investors avoid common portfolio pitfalls when and if conditions deviate from consensus thinking.      

The week ahead:

• Roughly one-fifth of the world’s oil supply, including from Saudi Arabia, Iraq, and Iran, runs through the Strait of Hormuz. Traffic transiting the straight had already dropped off significantly before the strikes began this weekend. According to the U.S. Energy Information Administration, China receives roughly 38% of the crude that travels through the Strait, with India receiving 15%, and other Asian countries collectively accounting for 37%. 
• Markets will likely be highly sensitive to oil prices this week as well as military developments. Over the intermediate term, a less stable Middle East, greater risk of attacks from Iran and its proxies in the region, and potential cyberattacks and other retaliatory responses against the U.S. and Israel could weigh on global asset prices for a period.  
• That said, we believe investors are best served by standing pat for now and ensuring their portfolio is well diversified and aligned with their goals. Markets have a long history of eventually looking through geopolitical events once they can discount outcomes and determine longer-term economic impacts on growth and corporate profits. 

These figures are shown for illustrative purposes only and are not guaranteed. They do not reflect taxes or investment/product fees or expenses, which would reduce the figures shown here. An index is a statistical composite that is not managed. It is not possible to invest directly in an index. Past performance is not a guarantee of future results.