U.S. stocks have given up all of their gains for the year, a key index of the so-called Magnificent Seven tech giants has slid into correction territory, and volatility gauges have spiked amid a rotation trade tied to artificial-intelligence disruption that likely will weigh on markets for the coming weeks.

The selloff, which began as concern that the biggest players in the AI investment boom had committed too much capital and were seeing too little return, has spread to a deeper worry that the new technology will trigger massive changes to the way companies do business in all sectors of the economy.

That's forced a repricing of everything from risk appetite to cash flow and ultimately corporate profit forecasts from all corners of the market, with those at the coalface of AI disruption, like software and financial services, getting hurt the most. Non-tech stocks have reaped the benefits.

"Investors are scrambling to get out of the digital world and back to the analog, physical world, which is less likely to be disrupted by AI," said Ed Yardeni, president and founder of Yardeni Research.

"Many of the trade's stock market casualties will survive and boost their productivity and profits using AI," he added. "However, AI is a disruptive technology causing lots of known unknowns about its ultimate impact on the earnings and the earnings growth of companies likely to be disrupted."

It certainly feels like a "sell first, ask questions later" market at the moment, with investors dumping stocks on the back of headlines linked to new AI offerings that could challenge their respective businesses.

"The AI selloff is no longer confined to a single corner of tech," said Charu Chanana, chief investment strategist at Saxo Bank. "The market is increasingly pricing dispersion and separating likely AI beneficiaries from businesses where AI could compress margins or automate away fee pools."

Trucking and logistics stocks were casualties Thursday, with market leaders C.H. Robinson and RXO falling 14.5% and 20.5% respectively, following the release of a new AI tool from Algorhythm Holdings.

Software and services stocks have been in free fall for weeks, dragging the iShares Expanded Tech-Software Sector ETF to the lowest levels in nearly a year and more than 30% from its mid-September peak.

Megacap tech stocks aren't immune, either, and angst tied to the pressure on margins, profit, and cashflows from the combined $650 billion in AI capex committed this year by the four largest hyperscalers -- Microsoft, Google, Amazon, and Meta Platforms -- has weighed on the market's biggest cohort.

The Roundhill Magnificent Seven ETF closed in correction territory on Thursday, declining some 10.6% from its late October peak.

More broadly, the S&P 500 is now negative for the year, having shed nearly 109 points during Thursday's slump, while the Nasdaq Composite is now down 2.78%.

There's more weakness ahead, as well, with all three major indexes set to open lower on Friday and the Cboe Group's VIX volatility gauge surging nearly 19% to 20.89, a level that suggests daily swings of around 1.3%, or 88 points, for the S&P 500.

Still, Jeff Buchbinder, chief equity strategist at LPL Financial, thinks the AI spending boom which kick-started the current market malaise will ultimately come to its rescue. But he does concede that could take some time.

"The elevated spending will likely be a boon for earnings across the S&P 500 as hyperscalers and beyond pay for the materials and industrial equipment associated with the data center buildout," he said. "Plus, expected productivity gains from AI development are also expected to be supportive for corporate America and the overall U.S. economy."

"But we expect additional bouts of volatility for big tech and the broad market as the AI debate continues," he added.