Tech set to still sway US <a s course despite AI-driven swoon
Even with the recent sharp retreat in AI-related stocks, the US equity market remains heavily dependent on the performance of the technology sector, and investors are bracing for potential hurdles that could disrupt this trend in the coming weeks.
A month-long decline in technology and AI-focused shares culminated this week in the S&P 500 technology sector’s largest single-day loss in more than six years. Investors are worried that Democratic victories in the midterm elections could result in a slowdown in data-center investment, which has been a primary driver of the market’s recent rally.
Despite this downturn, tech remains the largest sector within the S&P 500, the benchmark index for the US stock market. Although its influence has softened slightly, the technology sector still accounted for more than 35% of the S&P 500’s total weight as of Thursday’s close.
“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. “So weakness in AI is going to drag down tech, which drags down the S&P 500.”
The sector’s share of the S&P 500’s total market capitalization continues to exceed the levels seen during the peak of the dot-com bubble in 2000.
The technology sector alone does not fully represent the reach of AI. For instance, three major hyperscalers investing heavily in data centers—Alphabet, Amazon, and Meta Platforms—are categorized under different sectors.
The persistent dominance of technology is a result of the massive gains the sector achieved during the US bull market that began in October 2022. Even <a If somebody is in a profit-taking mode, there are still profits to be had," said Chuck Carlson, CEO at Horizon Investment Services.
The decline in tech has also caused valuations to appear more reasonable, at least on the surface. The sector’s forward price-to-earnings ratio—calculated using earnings projections for the next 12 months—dropped to 17.1 as of Thursday, down from a peak above 32 in October 2025.
