Wall Street and cryptocurrencies sank deeper into the red on Thursday as investors digested unexpectedly steep job losses and spending on artificial intelligence.
The Dow Jones Industrial Average slid nearly 500 points, or 1%, while the S&P 500 fell almost 1% and the Nasdaq dropped more than 1.2% in afternoon trading. The pain spread across risk assets, with volatility spiking and digital currencies suffering double-digit losses.
Bitcoin plunged more than 11% to about $64,000, while Ether, Solana and Dogecoin each fell roughly 10% to 12%. XRP was hit hardest, tumbling more than 20% in 24 hours.
The VIX — Wall Street’s so-called fear gauge — jumped more than 10%, signaling growing anxiety about where markets go next.
The selloff reflects what some investors described as a long-delayed “sobering up” after a year of optimism built around a soft economic landing, resilient jobs and the promise that AI spending would quickly translate into profits.
“Wall Street is panicking because the ‘soft landing’ fairy tale just hit a wall,” said William Stern, founder of fintech firm Cardiff.
“For a year, investors convinced themselves that rates would drop, AI would save productivity, and the labor market was bulletproof. Today’s data shattered all three illusions at once.”
The most immediate shock came from the labor market.
US employers announced 108,435 job cuts in January, up a staggering 118% from a year earlier and the highest January total since the depths of the financial crisis in 2009, according to Challenger, Gray & Christmas.
At the same time, hiring plans plummeted to a meager 5,306 — the lowest January figure since the firm began tracking the data.
Transportation and tech led the cuts, with thousands of layoffs tied to major companies like Amazon, underscoring growing caution among employers heading into 2026.
Those figures rattled investors who had leaned on a strong job market as proof the economy could withstand higher interest rates without slipping into recession.
The tech sector, already under pressure, took another hit as doubts mounted over whether massive AI spending will pay off anytime soon.
Big Tech companies have poured tens of billions of dollars into data centers, chips and infrastructure to support AI models, but investors are increasingly uneasy about the lack of near-term cash flow.
Alphabet recently disclosed plans to spend as much as $185 billion on AI-related capital expenditures this year, nearly double its outlays from the year before — a figure that spooked markets rather than reassured them.
“The AI bill has finally come due,” Stern said.
“For two years, Big Tech has been spending billions on infrastructure with no clear path to short-term profit. Investors were willing to overlook that when money was cheap and momentum was high. But in a selloff, patience evaporates.”
The result has been outsized losses in tech-heavy indexes and AI-linked stocks, which drove much of the market’s gains over the past two years.
At the same time, confidence in a smooth policy pivot has faded.
Investors who once bet aggressively on quick interest-rate cuts are now grappling with renewed uncertainty around inflation, geopolitics and global growth. That uncertainty is forcing a repricing of risk across markets rather than a single-sector correction.
“Too much money chased too few stocks,” said Ted Jenkin, managing partner at oXYGen Financial. “Now we’re watching the air come out of a very expensive balloon. This isn’t panic selling. This is profit-taking colliding with reality.”
