A sharp stock market rebound will only make investors more nervous.

Last week's plunge in software stocks rippled through large-cap tech stocks, private credit, and even the corporate bond market, ultimately ending with a stunning rebound, prompting investors to brace for even greater volatility ahead. The consecutive days of decline stemmed from investor concerns that the disruptive impact of artificial intelligence might be more widespread than anticipated, and worries that companies investing hundreds of billions of dollars in AI development might not be able to deliver the expected massive profits. However, recently, investors who bought on dips during the bull market have made a strong comeback. The Dow Jones Industrial Average surged more than 1,200 points, breaking the 50,000 mark for the first time. The S&P 500 narrowed its losses, remaining essentially flat for the week.

First, as the stock market enters a new week, tensions persist. Even amidst the rally, investor concerns about the massive investments in artificial intelligence remain. Amazon shares fell 5.6%, wiping out approximately $133 billion in market capitalization, after the company announced plans to invest $200 billion in AI-related areas this year. Alphabet shares fell 2.5%. Even though last week's rebound suggests investors believe the sell-off was excessive, few deny that the long-term prospects of the software companies that triggered the recent sell-off, as well as other companies on the path to artificial intelligence, are becoming increasingly uncertain.

Secondly, investors are expected to receive the delayed January jobs report and the latest inflation data this week, which could influence interest rate policy and market movements in the coming months. For tech stock investors still licking their wounds from last week's losses, the interest rate cut is undoubtedly good news. For some, the sharp fluctuations of the past week have reignited their long-standing concerns about the dominance of artificial intelligence in the stock market and the economy. Investors have long worried that the phenomenal gains in AI stocks in recent years have made this rally overly reliant on a few tech giants, and that the massive investments in AI by some of the world's largest companies have masked broader economic weakness.

Furthermore, the sell-off in software stocks and its ripple effects have panicked investors, who are speculating where the next wave of shocks might hit. Clark Belling, chief investment officer at Belwes Wealth in Nebraska, said his company plans to reduce its holdings in tech stocks and use the savings to increase its holdings in industrial and materials companies.

Furthermore, recent data has not brought much good news. According to the Labor Department's monthly report, the number of job openings in the U.S. fell by nearly one million last year. ADP, a human resources firm, estimates that the private sector added 22,000 jobs in January, less than half the figure expected by analysts surveyed by The Wall Street Journal. The January jobs report was delayed due to the brief government shutdown, making investors' assessment of the economic situation uncertain.

Currently, as investors sell off tech stocks, funds are rotating into sectors such as consumer staples, which were the best-performing sector in the S&P 500 last week. Investors typically view this sector as a defensive investment because people will still buy necessities even if the economy slows. The Russell 2000 index, a smaller-cap index more sensitive to economic conditions, rose 3.6% on Friday. However, some investors have recently been betting that this temporary boom will not last. Some investors say they expect strong corporate earnings to help drive the stock market higher. According to FactSet forecasts, S&P 500 companies' profits are expected to grow by 14% in 2026. Meanwhile, many still expect the volatility in the stock market that began in early 2026 to continue.

In general, the sharp stock market rebound has exacerbated investor anxiety, primarily stemming from market skepticism about the sustainability of the rebound and concerns about potential risks. For example, during the recent strong rebound in US stocks, investors became more cautious due to the uncertainty of returns from massive investments in artificial intelligence, weak economic data, and the risk of industry disruption, leading to a rotation of funds from technology stocks to defensive sectors. Simultaneously, investors experience "missed-out anxiety" and "profit-taking fear," making them prone to premature exits with small profits due to fear of loss, further amplifying unease amid market volatility.