The U.S. stock market declined today, continuing a downward trend that began late last month. The tech-heavy Nasdaq 100 Index and its related ETFs, such as the QQQ and JEPQ, declined by over 1.5%. They have all dropped by nearly 5% from the highest level this year.
Reason Why the Stock Market is Crashing Today
The Nasdaq 100 Index and its associated ETFs plunged as investors remained concerned about the technology sector amid the potential AI disruption.
Data show that software companies were among the top laggards, with AppLovin, Palantir, and Broadcom among the most lagging. Other top laggards this year include Microsoft, Adobe, ServiceNow, and Intuit.
Software stocks have plunged as investors remain concerned about the potential disruption of top AI tools. For example, companies such as LegalZoom and Verisk Analytics declined after Anthropic released a plugin focused on the legal industry.
However, some analysts argue that the ongoing selling is an overreaction because these AI tools will not disrupt the software industry. Instead, it will complement it in the long term.
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The Nasdaq 100 Index is also plunging as investors question some key themes. For example, the AMD stock price declined by over 16% even though the company reported strong results and raised its outlook.
This decline is likely due to the fact that the company, together with NVIDIA, has yet to obtain authorization to sell in China. The NVIDIA stock price remains in a correction after falling by more than 15% from its 2025 high.
At the same time, there are signs that investors are rotating from tech-heavy stocks to value stocks. Indeed, the Dow Jones Industrial Average rose by more than 50 points as the Nasdaq 100 Index slumped. The Schwab U.S. Dividend Equity (SCHD) has reached a record high.
Crypto Market Crash and Geopolitical Tensions
The stock market crash is also happening because of the performance of the crypto industry, where Bitcoin dropped to $73,000. Ethereum dropped to $2,200, while other top tokens like Solana and Pi Network have slumped by double digits in the past few days.
This is notable because several leading companies in the crypto industry are index constituents. For example, Strategy stock declined by 6.6% on Wednesday and is down by more than 70% from its highest level in 2025.
The stock market is also plunging as investors remain concerned about geopolitics, with the rising possibility that Donald Trump will attack Iran now that a large armada has arrived in the region.
Iran has warned that any attack, no matter how small, will trigger a regional war. Its key option is to impede maritime transit through the Strait of Hormuz, which would lead to higher crude oil prices. Indeed, data shows that Brent and West Texas Intermediate (WTI) have jumped to nearly $70.
The stock market is also going down as investors react to the nomination of Kevin Warsh to become the next Federal Reserve Chair. Warsh is widely regarded as a hawk who will keep interest rates higher for longer.
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