A fresh AI threat narrative torched data/software names, PayPal cratered on a messy quarter and a CEO swap, while Walmart quietly did something historic: it crossed $1 trillion in market value.
The hook: one AI product launch, and suddenly everyone remembers what “multiple compression” feels like
By mid-session it was clear the market wasn’t pricing earnings as much as obsolescence risk. The Nasdaq got clipped as investors rotated away from software and data businesses, exactly the kind of companies that look great… until a better model does the job cheaper.
The major indices ended lower. The S&P 500 fell 0.84%, the Nasdaq dropped 1.43%, and the Dow slipped 0.34%.
Why software got smoked: the “AI eats your lunch” trade is back
The spark: Anthropic’s new Claude tooling aimed at automating routine legal work, catnip for customers, cyanide for incumbents charging premium subscriptions for workflows AI can increasingly replicate. That headline pressure cascaded through data/software names.
Two of the ugliest prints:
Thomson Reuters (TRI | -15.67%)
FactSet (FDS | -10.51%)
And yes, Adobe (ADBE | -7.31%) also caught a big one.
This wasn’t about “AI hype.” It was about investors suddenly modeling lower pricing power and higher churn. That’s a different fear and it trades faster.
PayPal didn’t just miss, confidence snapped
PayPal (PYPL | -20.31%) delivered a double whammy: results and outlook underwhelmed, and the company announced CEO Alex Chriss is out, with Enrique Lores (currently HP’s CEO) set to take over March 1.
The market’s message was blunt: this isn’t a “one quarter” problem. When management changes come paired with weaker profit expectations, investors assume the turnaround is harder than advertised.
And the ripple effect was immediate: HP Inc. (HPQ | -4.09%) dropped as it named Bruce Broussard interim CEO.
Walmart’s milestone: $1 trillion market cap, without the tech-bro cosplay
While software names were getting repriced like it was 2022 again, Walmart (WMT | +2.94%) did something no traditional retailer has done before: it closed at roughly a $1.0T+ valuation.
This isn’t just “people are broke so they shop at Walmart.” It’s also execution: logistics, delivery, advertising, and a surprisingly real tech stack for a company that still sells socks and bananas. The market is rewarding dependable scale in a world that suddenly feels less predictable.
Earnings aftershocks: chips, pharma, soda, and a bank buyout
A few notable company moves that shaped sector tone:
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Palantir (PLTR | +6.85%) ripped on strong numbers and upbeat forward commentary.
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NXP Semiconductors (NXPI | -4.51%) slipped despite solid results, classic “good quarter, not good enough.”
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Pfizer (PFE | -3.34%) fell as investors looked past the headlines and into guidance/pipeline risk.
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Merck (MRK | +2.2%) managed to go the other way.
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Novo Nordisk (NVO | -14.86%) got punished hard after a weak outlook.
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PepsiCo (PEP | +4.93%) popped on stronger profit and momentum.
And in deal-land:
Webster Financial (WBS | +9.02%) jumped after agreeing to be acquired by Banco Santander.
Banco Santander (SAN | -6.36%) sold off on the buyer’s burden (and the usual “show me the synergies” skepticism).
Finally, after the bell: AMD (AMD | After Hours -8.01%) traded lower in after-hours despite beating on revenue/earnings, because guidance didn’t clear the market’s “whisper number.”
Macro and geopolitics: the shutdown ends, but the data calendar is still messy
The partial U.S. government shutdown ended after President Trump signed a funding bill into law.
But the shutdown disruption matters for markets because it muddied the labor-data flow: some releases were delayed, and traders are now leaning harder on ADP payrolls and services PMI as near-term tells.
Meanwhile, cross-asset signals stayed “uneasy”:
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Oil prices rose roughly 1.5%
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EUR/USD hovered around 1.1819
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Gold and silver pushed higher again
What I’m watching next
If Tuesday was a rotation day, the next question is whether it turns into a trend: more money leaving “AI-vulnerable” software and moving into cash-flow durability (retail staples, select industrials, energy), or whether this was just a one-day scare sparked by a flashy product launch.
Either way, the market still loves AI… but it’s starting to fear what AI breaks.
Kristoff - ChartMill
