U.S. stock markets experienced a sharp decline overnight, driven by a dual impact of AI-related panic trading and renewed fears of a tariff war. The Dow Jones plummeted more than 821 points, while the Nasdaq and S&P 500 both dropped over 1%. Most major technology stocks closed lower, with software shares facing another wave of heavy selling. The VIX volatility index surged more than 10%.

Recent data from Goldman Sachs indicates that institutional investors are offloading U.S. equities at the fastest pace in four years while purchasing downside protection. The skew for one-month S&P 500 options has reached its steepest level in four years, driven by the rising cost of put options and the relative affordability of call options.

On the evening of February 23, Eastern Time, all three major U.S. indices opened sharply lower. By the close, the Dow had fallen over 821 points, a decline of 1.66%, while the Nasdaq dropped 1.13% and the S&P 500 slid 1.04%.

Most large-cap tech stocks ended in negative territory. Microsoft fell more than 3%, while Amazon, Meta, and Tesla each dropped over 2%. Alphabet declined more than 1%. NVIDIA, set to report earnings later in the week, rose 0.91%, and Apple gained 0.6%.

Analysts noted that Monday's session saw a dual blow from an "AI shockwave" and resurgent trade war concerns, leading to another round of intense selling in financial and software stocks.

In market news, AI startup Anthropic announced new programming features for its Claude Code product, automating much of the research and analysis work for the legacy business programming language COBOL. This sparked concerns about the future of IBM's mainframe business. IBM's stock plunged over 13% on Monday, its largest single-day drop in more than 25 years. So far in February, the stock has fallen 27%, on track for its worst monthly performance in decades.

Other software stocks also suffered heavy losses. The software ETF IGV fell nearly 5%, closing at a new two-year low and heading for its worst monthly performance since 2008. Applovin and CrowdStrike each dropped over 9%, while Oracle fell more than 4%. Salesforce and Palantir declined over 3%.

Additionally, an article titled "The 2028 Intelligence Crisis" circulated widely, further unsettling investors. The piece, framed as a macro research report released in June 2028, speculated on the societal and economic impacts of advancing AI technology and the proliferation of intelligent agents.

The article proposed a hypothetical scenario: repeated AI advancements surpassing optimistic expectations may not necessarily benefit assets or the economy. Instead, abundant machine intelligence could compress labor income and disrupt consumption cycles, potentially triggering demand contraction and financial repricing stemming from a "productivity boom."

By the market close, most companies mentioned in the article had declined. Food delivery platform DoorDash and Blackstone each fell over 6%, while American Express dropped more than 7%. Uber and Visa also traded lower.

Michael O’Rourke, Chief Market Strategist at JonesTrading, commented, "This is a startling market reaction. I've seen this market show remarkable resilience in the face of real negative news. Now, a completely fictional piece is sending the market into a tailspin."

On the trade front, risks of renewed tariff wars have escalated significantly after much of last year's global tariff policies were overturned by the Supreme Court. Former President Trump warned on Monday that any country attempting to exploit the Supreme Court ruling would face higher tariffs and more severe consequences. Despite this, the European Union decided to pause approval of a U.S.-EU trade agreement, adding uncertainty to transatlantic economic relations.

Amid the turmoil, international gold and silver prices rallied. Spot gold rose 2.38%, while COMEX gold futures surged 3.31%. Spot silver jumped 3.99%, and COMEX silver futures soared 7.26%.

Market attention now turns to the annual State of the Union address, scheduled for Tuesday evening Eastern Time.

Goldman Sachs issued a sudden warning, noting that U.S. stocks are in an unusual period of "index-level calm and single-stock turbulence." Despite low readings in the VIX, institutional investors are aggressively selling equities and buying protection.

Goldman Sachs trader Brian Garrett stated in a recent report that recent institutional activity—including selling, shorting, and reducing gross and net exposures—reflects a defensive posture "more typical of when the VIX is at 35." The skew for one-month S&P 500 options has risen to its steepest in four years, driven by expensive put options and cheap call options.

A Goldman Sachs trading desk representative noted, "We are still not seeing demand for S&P 500 call options in the trading hall."

Data shows long-term asset management institutions were net sellers of $4 billion last week, bringing net sales to $10 billion so far this month. Hedge funds, via prime broker channels, have been net sellers of U.S. stocks in three of the past four weeks, with technology, media, and telecom sectors accounting for 70% of the net selling. Sector divergence is evident: funds are heavily selling software and internet stocks while buying semiconductor and memory chip shares.

Garrett pointed out that this represents one of the strongest monthly selling tendencies by asset managers and long-only funds in four years. Other significant selling months included August 2022 ($18 billion), March 2024 ($14 billion), and March 2025 ($22 billion).

Analysts suggest that U.S. markets are approaching a critical test. Global AI leader NVIDIA is scheduled to report earnings after the market closes on Wednesday, which could serve as a catalyst for a directional market breakout.