Global equities finished 0.4% lower as risk sentiment weakened. Value stocks reversed Wednesday’s decline and outperformed cyclical shares in a more defensive session.
The tech sector was the weakest area, driven by a slump in software stocks. Software companies fell 5.1% on the day.
Futures were mostly lower, while Nasdaq futures held up after Intel issued an AI-driven outlook. Asian equity indices traded mostly in the red.
The article was produced using an artificial intelligence tool and reviewed by an editor.
We are seeing a clear split in the market as risk sentiment sours. The tech sector is getting hit, but this weakness is very specific to software, which dropped over 5% in a single day after a major company reported slowing sales. This nervousness is now reflected in the CBOE Volatility Index (VIX), which has crept back above 18, showing traders are paying more for protection.
In response to this, money is rotating into value stocks which are reversing their prior losses. For the week, value-focused ETFs are up nearly 1% while broad growth funds are down over 2%, confirming a defensive shift. This suggests a preference for companies with stable current earnings over those promising future growth.
This is a very different environment from the broad tech rally we saw for most of 2025, where almost all AI-related stocks went up together. Intel’s strong AI-driven outlook shows the theme is not dead, but the market now requires proof of profitability. We are now seeing a clear separation between the AI infrastructure providers and the software firms that use their technology.
Derivative traders should consider buying put options on software ETFs like IGV to hedge against further weakness in that specific area. At the same time, the strength in semiconductor names suggests selling cash-secured puts or using bull call spreads on companies showing tangible AI profits. This sets up a potential pairs trade, being bearish on software applications while remaining bullish on the underlying AI hardware.
