U.S. stock futures traded mostly higher early Wednesday as investors parsed heavy losses across AI-linked software companies and braced for quarterly earnings from a handful of major technology names. The coming releases, led by Alphabet's report after the opening bell, have traders focused on companies' spending plans and progress in artificial intelligence initiatives.
By 02:53 ET (07:53 GMT), the futures contracts tied to the main U.S. benchmarks showed modest gains. The Dow Jones futures had risen by 134 points, or 0.3%, S&P 500 futures were up 19 points, or 0.3%, and Nasdaq 100 futures had climbed 57 points, or 0.2%.
Market snapshot
Equity markets on Wall Street had closed lower in the previous session, with some of the biggest technology names among the heaviest decliners. Semiconductor and software leaders that had been associated with rapid adoption of AI saw meaningful pullbacks, contributing to the broader weakness. The session highlighted how quickly investor sentiment can shift around the near-term winners and losers tied to AI exposure and the infrastructure build that supports those systems.
Within that backdrop, several themes emerged that investors said were driving current positioning: concern about heightened competition from new AI models, abrupt downward moves in specific software and publishing-related stocks, and a handful of corporate developments that might reshape expectations for spending and monetization across the sector.
Software slump and AI competition
Software stocks bore the brunt of the selling, with notable declines in companies that had been perceived as beneficiaries of the AI investment cycle. Nvidia and Microsoft were among the notable pullbacks in the prior session, each falling by nearly 3% and helping weigh on the averages.
Sentiment toward software names has soured recently amid investor concerns that newer AI models could disrupt the customer base or revenue streams of established companies in the sector. Those worries intensified after an AI developer released a new tool aimed at legal analysis, an event that knocked down shares of publishers and firms that supply legal or data services. Names tied to that segment, including Thomson Reuters and Legalzoom.com, dropped sharply as investors reevaluated how automation might affect demand for their products.
The spillover did not stop at publishers. Payments and travel-related software companies were also hit. PayPal and Expedia Group each plunged by more than 10% in the selling, reflecting the breadth and speed of the rout across parts of the software landscape. Meanwhile, two S&P indices that track software, financial data and exchange firms together shed roughly $300 billion of market value during the move, illustrating the sizable market-cap impact of the sell-off.
Analysts at Vital Knowledge described the episode in direct terms, saying that the core story was a marked pullback in technology as market participants increasingly view AI as a potential negative for parts of the market. Their note said companies that had been counted on to benefit from aggressive infrastructure spending were no longer seen as automatic winners, while broader concerns around AI disruption and displacement hit a wide swath of stocks.
Alphabet in the spotlight
All eyes are on Alphabet as the company prepares to release its quarterly results after the opening bell. Traders and analysts said the report will be watched closely for details about Alphabet's AI strategy and the scale of its investment commitments.
Like other large-cap technology firms, Alphabet has publicly outlined plans to invest heavily in AI, allocating funds to data centers and specialized chips that support the development and deployment of advanced models. Over the last quarter of 2025, Alphabet's shares were reported to have risen about 29%, a gain that market participants attributed in large part to positive reception of its latest Gemini AI model and a commercial arrangement with Apple to bolster the iPhone maker's voice assistant.
Some analysts cited in market coverage suggested Alphabet has taken a leading position in the race to develop and eventually monetize AI, overtaking other companies that had earlier been viewed as front-runners based on their investments and partnerships.
Vital Knowledge analysts noted that market sentiment toward Google was rightly optimistic given the continued strength of its core advertising business alongside its expanding role in the AI ecosystem. Yet they cautioned that it was unclear whether stronger returns tied to Alphabet's AI progress would be sufficient to steady sentiment around the broader AI narrative; in their view, the developments could instead amplify concerns about the competitive and economic dynamics enveloping the sector.
Additional color on the state of AI-driven expenditures and the technology sector more broadly is expected when Amazon reports its results on Thursday, providing another major data point for investors monitoring the pace and profitability of AI investments among the largest tech companies.
Outside the technology sphere, investors will also watch earnings for companies in other sectors. Drugmaker Eli Lilly is scheduled to report before U.S. trading opens and is among the higher-profile names on the corporate calendar, given the market interest in its revenue prospects tied to weight-loss medications.
Fed advisory role and policy context
On the policy front, Federal Reserve Governor Stephen Miran reportedly resigned from his position as an economic adviser to the White House. Miran's statement indicated that his decision was intended to honor a commitment he had made to the U.S. Senate: if he remained on the Fed's Board past the end of January, he would step down from the Council. The reported resignation allows Miran to remain at the Federal Reserve while his appointment on the Board continues until a successor is confirmed.
Since joining the Fed's Board of Governors, Miran had been a vocal advocate for significant interest rate reductions, positions that often diverged from the perspectives of other voting members. Those views have aligned with calls from the White House for more aggressive and faster rate cuts to support economic growth, and Miran's stance prompted criticism from some Democratic senators who argued the policymaker was acting in concert with a political agenda. In correspondence to Miran, those senators urged that he immediately step down from the Fed board.
The recent Fed decision-making environment remains relevant to market participants. At the Fed's last meeting, the committee chose to leave the target range for the federal funds rate unchanged at 3.5% to 3.75%. That decision came despite signs of softening in the labor market and ongoing inflation readings that are still above the policymakers' 2% target. Because economic activity has shown resilience overall, Fed members appeared to have limited urgency to resume the rate-cutting cycle that was more prominent in 2025.
Data on services sector and near-term economic focus
With the monthly jobs report delayed earlier in the week, other incoming economic measures will take on added importance. One such gauge is the Institute for Supply Management's non-manufacturing purchasing managers' index (PMI) for January, which tracks activity in the services sector. The services sector accounts for more than two-thirds of U.S. economic output, making its monthly readings closely watched for signals about demand, pricing pressures and employment trends in that part of the economy.
The non-manufacturing PMI is expected to come in at 53.5 for January, a decline from a prior reading of 54.4. A PMI reading above 50 is commonly interpreted as indicating expansion in services, so a figure around 53.5 would still reflect growth, albeit at a slightly softer pace than previously measured.
Gold rallies on geopolitical risk
Precious metals moved higher as investors sought safe-haven assets amid a spike in tensions between the United States and Iran. Gold approached $5,100 per ounce on renewed haven demand, extending gains after a rebound from losses recorded earlier in the week.
Market participants pointed to two incidents that contributed to elevated risk perception. Overnight reports indicated the U.S. shot down an Iranian drone in the Arabian Sea. Separately, Iranian gunboats were reportedly observed approaching a U.S.-linked tanker in the Strait of Hormuz. These developments appeared to undercut earlier messages that Tehran and Washington were planning talks on Friday, a scheduled dialogue that had briefly eased market concerns and reduced bids for bullion.
What to watch next
Near term, market attention will be squarely on Alphabet's earnings release for indications about AI spending and monetization, followed by Amazon's report the next day. The services-sector PMI and continued geopolitical developments also stand to influence risk appetite. Finally, investor reaction to corporate earnings across sectors - including consumer retail and pharmaceuticals - will help determine whether the recent bout of technology-led weakness stabilizes or spreads to other parts of the market.
In short, headline-driven moves in technology, policy shifts at the Fed level, incoming economic data and geopolitical frictions have combined to create a multifaceted market landscape that traders and portfolio managers will be monitoring closely in the coming sessions.