Dow soars by 1,200 points as Wall Street rebounds from tech meltdown

The sell-off in tech stocks screeched to a halt Friday as investors stepped in to buy the dip: The Dow soared 1,207 points, or 2.47%, and hit50,000 pointsfor the first time ever. The tech-heavy Nasdaq rose 2.18% and the S&P 500 rose 1.97%. The Dow and S&P each posted their best day since May. The Nasdaq had its best day since November. Tech stocks had dragged down Wall Street earlier this week as investors fled once-hot shares, and Friday’s fierce rally comes after the Nasdaq’sworst three-day slidesince April. The index had shed more than $1.5 trillion in market value this week before rebounding Friday. It’s been a turbulent few days for Wall Street, Big Tech and the entire software industry. Here’s why: “Recent months have seen a shift from the ‘every tech stock is a winner’ mindset to a more brutal landscape of winners and losers,” Jim Reid, head of global macro research at Deutsche Bank, said in a Thursday note. A sell-off in risky assets like bitcoin — which just hit itslowest level since October 2024— also probably fueled investors’ desire for safer assets earlier this week. Bitcoin rebounded Friday, soaring 10% to roughly $70,000. “Stocks are off to a volatile start in February,” Clark Bellin, president and chief investment officer at Bellwether Wealth, said in a note. “The bull market is not dead, but it is aging, and we are not surprised to see investors paying more attention to corporate earnings and profitability,” Bellin said. AI startup Anthropic on Friday released new tools that the company says can do more tasks for the legal industry. Thatmade Wall Street nervousthat companies will soon be able to dump their existing, specialized subscriptions to data analytics and research software, directly hurting software companies’ bottom lines. The jury is still out on whether that will actually happen. But investors were spooked and dumped shares in legal and financial software and services companies. There have been nerves about AI eating into software’s market share for a while: Salesforce (CRM), a software company in the blue-chip Dow index, slumped 20% in 2025 and is down 28% so far this year. Anthropic’s new AI tool sends shudders through software stocks Meanwhile, Wall Street is in the midst of corporate earnings season. There are lingering concerns (remembernerves about an AI bubble?) about Big Tech’s aspirations to build out massive data centers and infrastructure to power the AI boom and uncertainty about just how profitable that building rush will prove. Microsoft (MSFT), Alphabet (GOOG) and Amazon (AMZN) all outlined plans across the past week to increase their spending on building data centers and infrastructure. Wall Street wants to see evidence that these enormous expenditures will result in actual profits. Microsoft shares dropped 10% on January 29 after the company reported earnings. Amazon shares fell roughly 5.6% Friday after the company’s reported earnings Thursday afternoon. “The bar for Big Tech remains extremely high,” Seana Smith, senior investment strategist at Global X ETFs, told CNN. “Markets are only rewarding AI investment when it is paired with clear, durable revenue growth,” Smith said. The AI theme has driven the stock market higher across the past three years. Some investors are balking at paying those high prices and are instead looking for off-ramps. Shares of chipmaker Advanced Micro Devices (AMD) on Wednesday sank 17% and had their worst day since 2017 after the company forecast slightly less revenue in the first quarter than analysts had expected. AMD shares rebounded 8% on Friday. Valuations, a measure of how pricey stocks are, have been elevated for some tech companies. Palantir (PLTR), a star of the AI trade, surged 340% in 2024 and 135% in 2025. Palantir is now down 35% from its record high in early November. Oracle shares (ORCL)hit a record highon September 10 after the company announced a $300 billion deal with OpenAI. Oracle shares have tanked 59% since then. “Crowded trades are difficult to exit,” Steve Sosnick, chief strategist at Interactive Brokers, said in a note. “Assets that have been granted premium valuations, whether through rational expectations or speculative fervor, are more prone to messy selloffs if perceptions and/or momentum change.” Stocks drop on weak labor market data and AI concerns In recent years, anything related to AI has been a hot trade on Wall Street. But now investors need to get picky about specific companies they think will benefit. “Consensus about software companies has flipped to them being AI victims, not beneficiaries,” Sosnick at Interactive Brokers told CNN. “The rising tide surrounding AI was lifting a lot of boats,” Sosnick said. “Now it’s forcing Wall Street to be much more selective and really decide who are the winners and losers. And that’s going to require a lot more detailed analysis, rather than just sort of riding the momentum train.” Nvidia CEO Jensen Huang said this week the idea that software will be replaced by AI was “illogical,” according toReuters. Barclays backs up that sentiment. “It just does not seem realistic” that AI companies can supplant those industry-specific software tools, wrote Nick Dempsey, direct of media equity research at Barclays, in a note. But with markets this touchy, headlines about the possibility are “clearly not helpful,” he added. An exchange-traded fund tracking the software industry rose roughly 3% on Friday, pausing an eight-day slide. “At this point, the negativity surrounding AI-related tech is getting pretty intense,” Tom Essaye, president of Sevens Report Research, said in a note. “Granted, there are reasons for the skepticism, but the declines in some of these stocks are substantial, and if AI is more resilient than expected (which has been the case in each test so far over the past three years), then there are opportunities [for buying] developing,” Essaye said. Separately, chipmakers also gained Friday as Big Tech’s plans for data centers will likely boost demand for semiconductor chips. Nvidia shares (NVDA) soared 7.78% and had their best day since April. “When you pull the beach ball underwater that quickly in places like Big Tech, certainly software and semis, the bounce back can be breathtaking,” Chris Galipeau, senior market strategist at Franklin Templeton, told CNN. CNN’s Matt Egan contributed reporting