S&P 500 loses its footing as AI and crypto sell off

The market’s focus is still glued to the stars of the AI boom. Shares of the biggest tech names, from chipmakers to cloud giants, have come under pressure after a record rally in 2025. Investors are worried not only about stretched valuations but also that corporate AI budgets may start growing more slowly than expected. The upcoming Nvidia earnings report is turning into a stress test for the whole AI trade: even a hint of cooling demand could add more weight on the index.

Crypto is adding its own layer of stress. Back in October, Bitcoin notched a fresh all-time high above $126,000, powered by inflows into spot ETFs and a sense that institutional money had finally embraced it. Now the picture looks very different: the largest cryptocurrency has slipped below the $90,000 mark, wiping out roughly a quarter of its value, while Ether has dropped nearly 40% from its summer peak. The sell-off is hammering shares of exchanges and mining firms and feeding a broader reluctance to take on risk.

The stock market heads into the new session after a rough Monday, when the Dow Jones fell more than half a percent and the S&P 500 and Nasdaq also finished deep in the red. Futures suggest the wave may not be over yet. Investors are digesting losses in the market’s recent favorites while also dialing back hopes for aggressive Fed rate cuts. On top of that, a batch of economic data and earnings from major retailers later this week will show how confident the American consumer really feels.

To understand today’s anxiety, it helps to remember how 2025 has played out so far. Most of the S&P 500’s gains have come from a handful of mega-cap tech and AI names, while the Nasdaq 100 kept notching new highs. Their weight in the major indices has become so large that any move in these stocks instantly ripples across the entire market. A few weak sessions in the AI trade have already shown how fragile the setup is when so many expectations rest on a small group of tickers.

Crypto followed a similar script. Many traders viewed 2025 as the year Bitcoin finally went fully mainstream: spot ETF approvals, a rush of institutional capital and friendly comments from politicians. But the sharp price drop has already erased hundreds of billions in market value and is a reminder that this market is still extremely volatile, even if it has long since outgrown its niche status.

As the new session kicks off, Wall Street is grappling with a simple question: what happens to the major indices if the engines in the form of AI giants and crypto risk keep stalling? The next few days may offer some clues, with Nvidia’s results, fresh economic data and new signals from the Fed all on deck.