Amazon Dethrones Walmart as AI Triggers Major Tech Sell-Off
The market is grappling with a major reshuffle as investors flee traditional software companies, fearing their business models will be made obsolete by AI. This rotation into AI hardware is happening against a nervous backdrop of rising geopolitical tensions and new signs of stress in the private credit market, reminding investors that external shocks can quickly shift sentiment.
Market Snapshot
- 📉 S&P 500: 6,861.89 (-0.28%)
- 📉 DOW: 49,395 (-0.54%)
- 📉 NASDAQ: 22,683 (-0.31%)
- 📈 FTSE 100: £10,690 (+0.26%)
New Headwinds: Geopolitics and Credit Jitters
Markets took a nervous turn as two new risks emerged, overshadowing underlying corporate performance. Geopolitical tensions and concerns about a niche but important part of the lending market have reminded investors that outside events can quickly change the direction of travel.
Middle East Tensions Push Oil Higher
Fears of a potential military strike on Iran by the US have sent a ripple of concern through the markets. The primary impact was on oil prices, which jumped almost 2% as traders priced in the risk of supply disruptions from the critical region. President Donald Trump added to the tension by stating he would decide on whether to launch strikes “over the next probably 10 days,” giving the market a concrete, if worrying, timeline.
Private Credit Market Shows Cracks
Meanwhile, a tremor was felt in the private credit market—a corner of finance where private companies lend to other businesses, away from public stock and bond markets. Asset manager Blue Owl Capital tightened the rules on investors pulling money out after selling $1.4 billion in loan assets.
This move sparked concern about the stability of the sector, which has grown rapidly in an era of low interest rates. The worry is that lenders may have taken on too much risk. The news hit shares of major asset managers, including Blue Owl, Blackstone, and Apollo Global Management.
Retail and Industrial Sectors See Major Divergence
The retail and industrial landscapes are showing clear signs of splitting, with tech-driven companies pulling ahead while traditional firms face tough questions about profitability and growth.
Amazon Overtakes Walmart in Landmark Quarter
In a landmark moment for retail, Amazon has officially surpassed Walmart to become the world's largest company by quarterly revenue for the first time. While Walmart still holds the top spot for annual sales, Amazon is closing the gap, largely powered by the phenomenal growth of its cloud-computing division, Amazon Web Services (AWS).
Walmart, meanwhile, saw its shares close more than 1% lower after providing soft guidance for the year ahead. This divergence highlights a critical reality: both giants target cost-conscious consumers, but Amazon's dominance in technology gives it a decisive, and more profitable, edge.
Investor Sentiment Splits on Growth vs Profit
Online furniture retailer Wayfair saw its shares plummet despite reporting its first annual sales growth since 2020. Management's plans to sacrifice profit margins for aggressive market share growth spooked the market. This sell-off dragged down peers like Williams-Sonoma and RH, underscoring sector-wide anxiety about risky expansion.
In stark contrast, agricultural machinery giant Deere & Co. saw its shares jump by as much as 13% after raising its annual financial outlook. The company projects that 2026 will mark the beginning of a significant upturn for the agriculture sector, demonstrating investor preference for stable, profitable outlooks.
The Battle for Brand Dominance
Boston-based New Balance posted a remarkable 19% sales surge in 2025, reaching $9.2 billion, putting it on a path to break the $10 billion barrier this year. The company's success stands in contrast to rival Nike, which has struggled. In another strategic move, home goods retailer Bath & Body Works launched an official storefront on Amazon, showing how established brands are increasingly using the e-commerce giant's platform to reach customers.
The Great AI Reshuffle: Software Sinks, Hardware Soars
A seismic shift is underway in the technology sector, as the emergence of autonomous AI agents threatens to upend the traditional software industry, triggering a massive rotation of capital into the companies that build the underlying hardware. Despite a broader pullback on Thursday, the tech-heavy Nasdaq Composite is on track to snap its five-week losing streak, its longest such stretch since 2022, though the internal split is stark.
Software's "Structural Reset"
The introduction of advanced AI assistants, or 'agents', that can perform complex tasks without human intervention has put the software-as-a-service (SaaS) industry on notice. Since the launch of models like Anthropic's Claude Cowork, investors have rapidly sold off shares in companies that rely on a 'per-seat' licensing model.
Key points include:
- The iShares Expanded Tech-Software ETF has fallen roughly 30% from its recent highs, officially entering a bear market.
- Major software firms like ServiceNow, Atlassian, and HubSpot have experienced double-digit percentage drops in a single day.
- This sell-off is not just a reaction to a bad quarter; it represents a fundamental challenge to how software is sold. If an AI agent can do the work of a team, the need for numerous specialised software subscriptions diminishes.
AI Memory and Chips in High Demand
While software companies struggle, the firms building the infrastructure for AI are thriving. Hyperscalers like Google and Meta are investing an estimated $750 billion into AI data centres. This has led to surging demand for high-performance memory, pushing stocks like Sandisk and Samsung to new highs.
Underscoring this trend, chipmaker Nvidia is reportedly planning to invest up to $30 billion in OpenAI, which would place the AI startup at a staggering $730 billion valuation. The market is clearly betting that the value is in the 'picks and shovels' of the AI gold rush, not the established software platforms.
Banking, Regulation, and the Future of Finance
Financial institutions are navigating a complex environment of technological innovation and intense regulatory scrutiny, particularly in the digital asset space.
Deutsche Bank Adopts Ripple's Blockchain Technology
Germany's largest bank, Deutsche Bank, is reportedly expanding its use of Ripple's technology to modernise its international payment systems. The goal is to replace the slow, costly SWIFT system with a blockchain-based ledger for near-instant settlements. This move, part of a consortium with 40 other institutions, is a major vote of confidence in blockchain's ability to serve as the core plumbing for global finance, potentially slashing operational costs by a third.
White House Pushes for Ban on Stablecoin Yields
The White House is intensifying efforts to regulate stablecoins, setting a March 1st deadline for a legislative compromise. Draft rules propose a complete ban on earning interest from idle stablecoin balances, a move aimed at preventing these digital currencies from competing with traditional bank savings accounts.
The proposed rules carry severe penalties—up to $500,000 per day for violations. While earning passive yield may be prohibited, negotiators are discussing allowing rewards for specific activities like lending or making payments. This regulatory clarity is seen as a key step to unlocking trillions in institutional capital waiting to enter the digital asset market.
JPMorgan Fights Trump's 'Debanking' Lawsuit
JPMorgan is pushing back against a $5 billion lawsuit from Donald Trump, who claims the bank closed his accounts for political reasons. The bank argues it was managing regulatory and 'reputational risk' and is attempting to move the case to federal court. The outcome will be a key test of how much power banks have to cut ties with high-risk or politically controversial clients.
Klarna's Profitability Puzzle
The 'buy now, pay later' giant Klarna is learning that today's investors demand profits now, not later. Despite posting its best-ever quarterly sales, its shares plunged after earnings revealed its losses were growing, not shrinking. The selloff pushed the stock to an all-time low. This highlights a market-wide shift: top-line growth is no longer enough; a clear and believable path to profitability is now essential.
Institutional Giants Move Deeper into Digital Assets
While regulators tighten rules, major financial players are accelerating their adoption of blockchain technology, signalling a growing acceptance within the establishment.
- Apex Group, which manages $3.5 trillion in assets, is partnering with the Trump-affiliated World Liberty Financial. They will test using the USD1 stablecoin for managing investment funds, aiming to make subscriptions and redemptions more efficient.
- BlackRock, the world's largest asset manager, integrated its BUIDL fund (a fund representing shares as digital tokens on a blockchain) with a major decentralised finance platform.
- Apollo Global Management has also partnered with a blockchain-based lending platform, further blurring the lines between traditional finance and the digital asset world.
These moves show that despite market volatility and regulatory uncertainty, the world's biggest financial institutions see long-term value in using blockchain to reduce costs and improve settlement efficiency.
Economic Indicators and Corporate News
Key economic data points to a resilient but complex economy, while individual companies are navigating unique pressures.
Global Economic Data
- US Inflation Watch: Markets are on high alert for the upcoming Personal Consumption Expenditures (PCE) inflation report, which is projected to show a 2.9% year-over-year increase. This remains well above the 2.0% target and will influence central bank interest rate decisions.
- US Labour Market Cools: Recent jobless claims came in lower than expected, suggesting layoffs remain low. However, new data shows the incentive to switch jobs is fading. The pay premium for job-hoppers fell below 2 percentage points, down from a peak of 8.4 points in April 2022. This suggests a stable but stagnant employment picture where the 'great resignation' is firmly in the past.
- US Trade Deficit Narrows: The full-year 2025 US trade deficit came in at $901.5 billion, a 0.2% decrease from the prior year, suggesting that broad and steep tariffs have had a limited impact. Markets are now watching for a potential Supreme Court ruling on the legality of these tariffs, which could have big implications for businesses and consumers.
- Japan Inflation Cools: Japan’s headline inflation rate fell to 1.5% in January, its lowest level since March 2022. This ended a 45-month streak where inflation stayed above the Bank of Japan's 2% target, which could influence its monetary policy.
Commodity and Corporate Updates
- Airbus Headwinds: European planemaker Airbus saw its stock fall 6% after warning that its aircraft deliveries for the year would be lower than expected. The CEO blamed ongoing engine shortages from suppliers for the slowdown.
- Nestlé Sells Ice Cream: Nestlé is in advanced talks to sell its ice cream brands, including Häagen-Dazs and Drumstick, for around $1.3 billion. The company's new CEO described the division as a 'distraction' from its core focus on coffee, pet care, and nutrition.
- Cocoa Prices Fall: Cocoa bean prices have fallen for nine consecutive days, the longest losing streak since 2017, as producers cut prices to stimulate weak demand. However, experts caution that consumers are unlikely to see cheaper chocolate on shop shelves anytime soon.
- Silver at a Crossroads: The price of silver is finding solid support around the $74 per ounce mark. A breakout will depend heavily on economic data; if the upcoming PCE inflation figures are cooler than expected, it could spark a recovery.
NOTE: This content is for informational and educational purposes only and does not constitute financial advice. Always do your own research. Not financial advice (NFA).