U.S. stocks closed lower on Thursday, with technology shares leading the decline and the Nasdaq Composite falling over 2%. The S&P 500 declined for a third consecutive session. Investors are growing concerned about the negative impacts of artificial intelligence development, which could disrupt business models across multiple industries and potentially increase unemployment rates.

The Dow Jones Industrial Average dropped 669.42 points, or 1.34%, to close at 49,451.98. The Nasdaq Composite fell 469.32 points, or 2.03%, to 22,597.15. The S&P 500 lost 108.71 points, or 1.57%, ending at 6,832.76.

Cisco led the decline in the technology sector, plunging 12.3% after the network hardware manufacturer issued disappointing guidance for the current quarter. Apple fell 5%, marking its largest single-day decline since April 2025, following allegations by the U.S. Federal Trade Commission that Apple News favored left-leaning media while suppressing conservative content.

This year, specific stock market sectors have faced pressure following the release of AI tools. Investors worry these tools could disrupt certain industry operations, increase unemployment, or at least erode profit margins. This significant market rotation is occurring as investors increasingly scrutinize traditional companies that may struggle to keep pace with rapid AI advancements.

Financial stocks like Morgan Stanley faced pressure due to concerns that AI could disrupt wealth management operations. Trucking and logistics firms such as C.H. Robinson saw sharp declines over fears that AI optimization of freight operations could hurt specific revenue streams. Investors worry new AI tools could eliminate major inefficiencies in freight logistics, reducing demand for industry services. C.H. Robinson closed down 14.5%.

The introduction of a new tool called SemiCab by AI firm Algorhythm Holdings has made trucking companies the latest victims of AI-related anxiety, intensifying a selloff in software and real estate stocks that had already reached historic highs.

Concerns about AI's disruptive impact have even spread to the real estate sector, affecting stocks like CBRE Group and SL Green Realty on expectations that rising unemployment would reduce demand for office space.

Software stocks, a sector already troubled by disruption concerns in recent weeks, extended their year-to-date losses during the session. Autodesk fell 3.9%, bringing its year-to-date decline to 26%. The iShares Expanded Tech-Software Sector ETF (IGV) dropped 2.7% and is now down approximately 32% from its recent peak.

Commenting on the recent selloff, Ross Mayfield, an investment strategist at Baird, stated, "In my view, this is purely crowd psychology. Sell first, analyze later, but don't be the one left holding the bag. Money flowing out of the software sector has to go somewhere."

A selloff in silver, which has been a popular trade among retail investors this year, added to the risk-off sentiment on Thursday. Silver futures plummeted 9%.

Investors sought safety in more defensive market sectors. Walmart and Coca-Cola saw their shares rise 3% and 2% respectively. Consumer staples and utilities sectors led the gains among S&P 500 groups, both rising more than 1%.

In the previous session, stocks closed lower after an early rally fueled by a strong jobs report faded. Enthusiasm for the data waned as economists questioned whether it marked the start of a new employment growth trend, especially given accompanying revisions showing zero job growth in the second half of 2025.

Traders are now preparing for Friday's key inflation report. Economists surveyed by Dow Jones expect both the headline Consumer Price Index and the core index, which excludes food and energy prices, to show a 0.3% month-over-month increase for January.

"Now that we have decent jobs data, the CPI is less critical because the jobs data alone is enough to keep the Fed on hold for quite some time," Mayfield said. "If the CPI reading is high, you have several more months of data to gauge the trend before the Fed truly faces a tough decision."

Conversely, if the data comes in weak, the strategist anticipates Friday could become a risk-on trading day, though "the data would have to be really, really bad to truly impact the stock market and federal funds futures," he added.