US stock market remains heavily dependent on technology shares. Despite the recent fall in artificial intelligence (AI) stocks, the US stock market is still expected to depend heavily on how technology shares perform. Investors are watching for possible developments that could affect the sector and the wider market in the coming weeks.
Technology and AI-related stocks have been falling for nearly a month. The decline reached a major point this week when the S&P 500 technology sector recorded its biggest single-day fall in more than six years, according to Reuters.
Investors are worried that Democratic victories in the US midterm elections could slow down spending on data centres. These facilities are important for running AI systems and have played a major role in driving the stock market's recent rally.
Even after the recent fall, technology continues to be the largest sector in the S&P 500, which tracks the performance of major US-listed companies. The sector accounted for more than 35% of the index as of Thursday's market close, although its share has declined slightly.
Since a large part of the technology sector is linked to AI, a fall in AI-related shares can affect the entire sector. This can also put pressure on the S&P 500 because technology stocks have such a large weight in the index. Robert Pavlik, senior portfolio manager at Dakota Wealth Management, said weakness in AI stocks could drag down technology shares and, in turn, the S&P 500.
{{/usCountry}}Since a large part of the technology sector is linked to AI, a fall in AI-related shares can affect the entire sector. This can also put pressure on the S&P 500 because technology stocks have such a large weight in the index. Robert Pavlik, senior portfolio manager at Dakota Wealth Management, said weakness in AI stocks could drag down technology shares and, in turn, the S&P 500.
{{/usCountry}}The technology sector's share of the S&P 500's total market value is still higher than the level recorded during the peak of the internet stock bubble in 2000. This shows how much influence technology companies have gained in the US stock market.
The impact of AI is not limited to companies officially classified under the technology sector. Major cloud and internet companies are also spending heavily on building data centres. Alphabet, Amazon and Meta Platforms are three such companies, but they are classified under other sectors of the S&P 500.
The sector's large share of the stock market is mainly the result of strong gains during the US bull market that began in October 2022. Despite the recent sell-off, technology stocks have gained more than 200% during this period, almost twice the S&P 500's overall gain.
Some companies that benefited from the AI boom have continued to record large gains despite their recent losses.
- Sandisk: Its shares remained up around 250% in 2026.
- Dell Technologies: Its shares were last up around 160%.
- Micron Technology: Its shares had gained around 140%.
US stocks recovered some of their losses on Friday. After this recovery, the S&P 500 was up nearly 8% for the year, while the technology sector had gained around 11%. Chuck Carlson, CEO of Horizon Investment Services, said investors looking to book profits still had gains available to take from their investments.
Technology stock valuations become cheaper after the sell-off
The recent fall has also made technology stocks appear less expensive based on their expected future earnings. The technology sector's forward price-to-earnings (P/E) ratio fell to 17.1 as of Thursday, according to LSEG Datastream. The ratio had climbed above 32 in October 2025.
The forward P/E ratio of the wider S&P 500 stood at 17.9. This week marked the first time since 2017 that the technology sector's P/E ratio had fallen below that of the broader market.
Lower valuations could mean that investors have already factored in several risks facing technology stocks. Keith Lerner, chief investment officer at Truist Advisory Services, said the market may already be pricing in a lot of bad news.
Lerner said that the market could be moving towards a situation where even a little good news could have a strong positive impact on stocks. Investors are therefore watching several upcoming developments that could decide whether the AI trade recovers or faces further losses.
Three major developments investors are watching
The planned initial public offering (IPO) of AI company Anthropic is one of the major developments investors are watching. How the company moves ahead with its stock market listing could affect confidence in the wider AI industry.
Reuters reported on Thursday that some potential investors were questioning whether Anthropic could go ahead with its IPO roadshow next week and remain on track for a November listing. These concerns are partly linked to the sharp fall in technology stocks.
Investors will be watching whether the company can attract enough interest despite the recent market decline. Any delay or change in its IPO plans could affect how investors view the demand for AI companies and their future growth.
Cloud computing company CoreWeave is scheduled to report its results on Tuesday. The company is at the centre of concerns about how the massive spending needed to build AI infrastructure will be financed. Its results could give investors more information about the financial strength and sustainability of AI-related investments.
Nvidia, one of the biggest companies benefiting from the AI boom, is scheduled to announce its results on November 17. Investors will closely examine its earnings and business outlook for signs of whether demand for AI chips remains strong. Its results could influence confidence across the wider AI and technology sectors.
Dell Technologies is scheduled to report its results on November 24. Since the company has benefited from demand linked to AI infrastructure, investors will watch its performance for further signs about spending on AI-related technology.
Iran conflict, inflation and interest rates could affect the market
Apart from technology earnings and IPO developments, investors are also watching the conflict involving the US, Israel and Iran. Any major development could affect the wider stock market, particularly through changes in oil prices and investor confidence.
Oil prices fell this week as investors expected that the change in control of Congress following the midterm elections could help bring the conflict to an end. The decline in oil prices also supported the stock market.
Despite the recent fall in oil prices, investors are concerned that tensions could increase now that the midterm elections are over. Any escalation could create fresh uncertainty for financial markets.
The Federal Reserve may raise rates in the coming months to control inflation. Higher interest rates can make borrowing more expensive and put pressure on company growth and stock valuations.
The upcoming Consumer Price Index (CPI) report will provide investors with fresh information about inflation in the US. The figures could influence expectations about the Federal Reserve's next interest rate decisions and determine how markets respond in the coming weeks.
Despite the recent AI sell-off, technology companies continue to account for a major share of the S&P 500. Investors will now watch Anthropic's IPO plans, CoreWeave's and Nvidia's earnings, Dell's results, inflation data and developments involving Iran. These factors could determine whether technology stocks recover or face further pressure, with the wider US stock market likely to feel the impact.