The market's AI apocalypse is flaring again as software and memory stocks tank

• US stocks are getting slammed again on Thursday as investors hasten their rotation out of tech.
• Major indexes opened higher but tumbled as software and memory names sold off.
• The S&P 500 is on track for a third straight day of losses.

It's shaping up to be another tough week for the tech sector.

US stocks slid lower on Thursday, with the S&P 500 on track to notch its third straight day of losses as investors continued to dump tech and software holdings and rotate into other areas of the market.

Major indexes were up earlier in the day, but tumbled more than 1% around noon. The iShares Expanded Tech-Software Sector ETF, which recently entered a bear market and endured brutal selling last week, dropped another 3%.

Here's where major indexes stood around 12:30 pm ET on Thursday:

• S&P 500: 6,861.70, down 1.15%
• Dow Jones Industrial Average: 49,572.76, down 1.09% (-548.64 points)
• Nasdaq Composite: 22,694.66, down 1.61%

The market's steepest losses were concentrated in the tech sector, particularly among software and memory stocks. Here were some of the notable moves:

• Apploving Corp: -18%
• Cisco Systems: -11%
• Palantir: -6%
• Varonis Systems: -5%
• Apple: -3%
• Amazon: -3%

The continued selling pressure is a sign that investors' concerns about AI haven't ebbed despite a relief rally in tech at the start of this week. Software stocks took a beating last week as traders assessed the threat posed by AI and remained cognizant of high valuations in the broader tech landscape.

A trio of AI-exposed sectors tumbled this week, with shares of insurance brokerages, wealth managers, and real estate services firms dropping on fresh worries about AI disruption.

Investors are also likely reacting to recent softness in the economic data, according to Jose Torres, a senior economist at Interactive Brokers. He pointed to how most sectors in the economy were losing jobs, despite the US overall adding more payrolls than expected in January.

Investors are also keyed into the earnings potential of AI and are beginning to be more selective about the companies they invest in, he added.

"You have dwindling AI hopes coinciding with lackluster economic reports," he told Business Insider.

"Software/services are being repriced as agentic AI pressures pricing power," Rosenberg Research wrote in a client note on Thursday, pointing to uncertainty around future cash flows among large tech firms. "The sustainability of the accelerating investment cycle and the ultimate beneficiaries of the growth story remain highly uncertain," the firm added.