Markets whipsawed over the week as investors rotated between optimism around AI-driven productivity gains and renewed valuation caution. Early strength faded as participants reassessed how much future growth is already priced in, leaving a more defensive tone into the close and broad weakness beneath the headline indexes.
For the week ending February 13, the S&P 500 declined approximately −0.97 %, the Dow Jones Industrial Average slipped about −1.12 %, and the Nasdaq Composite fell −1.63 %. The tone reflected a market still trying to balance moderating inflation trends with the reality that policy is unlikely to ease quickly.
On the inflation front, January CPI rose 0.2 % month over month and 2.4 % from a year earlier. While the headline was softer than feared, services components remained firm. The labor backdrop added to the ambiguity: payroll growth of roughly 130,000 and unemployment near 4.3 % pointed to resilience, but revisions to prior months tempered enthusiasm. Together, the data kept investors anchored to a gradual-cooling rather than reaccelerating economy.
Within the Information Technology, software exposure remained a central source of pressure. The broader Information Technology sector, which includes many software firms, fell 1.43 % for the week ending February 13. However, the Software & Services industry group specifically was reported down 19.7 % year-to-date as of February 12, reflecting the severity of the multi-week selloff. The market’s concern is increasingly structural: if generative AI can replicate features, automate workflows, or lower switching costs, traditional seat-based subscription models may face margin and multiple compression. Investors are demanding clearer proof of durable differentiation, proprietary data advantages, and credible monetization rather than awarding premiums for AI affiliation alone.
The week reinforced an environment that remains constructive but far more discriminating. Leadership is narrowing, volatility is elevated, and businesses perceived to have vulnerable competitive positions are being repriced with greater speed.