Tech Set to Still Sway US Stocks Despite AI-Driven Slump
US technology stocks remain the biggest force in the S&P 500 after the sector's worst one-day drop in over six years. Investors are watching the Anthropic IPO and key earnings, while cheaper valuations lead some strategists to see room for relief.
Technology stocks are set to still sway the direction of the US stock market, even after a month-long slide in AI-related shares. The S&P 500 technology sector this week suffered its biggest one-day drop in over six years.
The sector still carried a weight of more than 35% in the S&P 500 at the last close cited by analysts. That is slightly lower than before, but far larger than any other group.
Investors fear Democratic victories in the midterm elections could slow the data-center spending that has driven the market's rally. They are also on guard for obstacles in the coming weeks.
"Because so much of technology is AI-sensitive, it's going to have an impact on the entire sector, and that sector carries so much weight within the S&P 500," said Robert Pavlik, senior portfolio manager at Dakota Wealth Management.
Weight above the dot-com peak
The tech sector's share of S&P 500 market value remains above the level it hit at the height of the Internet bubble in 2000. The sector alone also understates AI's reach. Alphabet, Amazon and Meta Platforms, which are spending heavily on data centers, are classified in other sectors.
Tech has gained more than 200% since the US bull market began in October 2022. That is nearly double the S&P 500's gain over the same period.
Some AI winners are still well ahead for 2026. Sandisk was up about 250%, Dell Technologies about 160% and Micron Technology 140%.
Stocks rebounded somewhat on Friday. The S&P 500 was up nearly 8% for the year, with tech up about 11%. "If somebody is in a profit-taking mode, there are still profits to be had," said Chuck Carlson, CEO at Horizon Investment Services.
Valuations have cooled
The tech sector's forward price-to-earnings ratio, based on estimates for the next 12 months, fell to 17.1, according to LSEG Datastream. It had risen above 32 in October 2025.
The S&P 500 as a whole stood at 17.9. This week was the first time since 2017 that tech's ratio dropped below the broader market's.
Keith Lerner, chief investment officer at Truist Advisory Services, said the market is "arguably … already pricing in a lot of bad news." He added in a note: "We are moving toward a situation where a little good news could go a long way."
Catalysts ahead
The initial public offering of AI lab Anthropic could move sentiment. Potential investors are raising doubts about whether it can start its roadshow next week in time for a November listing, reflecting in part the tech sell-off.
Most third-quarter earnings reports are done, but key ones remain. CoreWeave, a cloud company at the center of concerns about financing the AI buildout, reports on Tuesday. Nvidia, seen as the AI bellwether, is also due to report in November.
