In March 2026, the once high-spirited and soaring U.S. stock market is encountering an unexpected "cold winter". This "market giant" that has accumulated countless glories over the past three years has seen its market value evaporate by a full $2 trillion in just three months. All seven major tech giants (Mag 7) have suffered setbacks, with their year-to-date gains completely wiped out. Along with this, the S&P 500 Index has recorded five consecutive weeks of decline, hitting a seven-month low, and the Dow Jones Index has entered a correction range — this is its worst start in four years, and the once bull market carnival seems to have been torn apart by the cold wind overnight.

This "cold snap" came quickly and fiercely, with no warning at all. At the close of the U.S. stock market last weekend, all seven major tech giants collectively lost their luster, and none escaped the fate of decline: Tesla is down 26.4% year-to-date, Microsoft down 15%, Meta down 15.2%, NVIDIA down 10%, Amazon down 9.5%, Google down 9%, and Apple, which is relatively resilient, is also down 2%. The S&P 500 Index has fallen for five consecutive weeks, with a cumulative year-to-date decline of 5.1% — the longest losing streak since 2022. The once market confidence is being eroded little by little.

It should be noted that these giants were once the "backbone" of the U.S. stock market and the "engine" of the bull market. In 2023, NVIDIA soared 239% and Meta soared 194%, supporting the U.S. stock market carnival with their amazing gains; but now, their glory is gone — although NVIDIA is only down 10% year-to-date, if you bought at the peak in October 2025, investors have already lost 21.2%; Meta has fallen 15.2% from its peak, and the faith accumulated during the three-year bull market has been gradually worn away by the market's cold snap in just three months.

In fact, this decline has long been foreshadowed. From 2024 to 2025, the growth rate of U.S. stocks has slowed significantly, shrinking from 107% to 64%, and then to 23%. The pace of growth is getting slower and slower, but the market valuation has not adjusted accordingly and remains at a high level. Just like a runner who has overdrawn his physical strength, after the carnival, he finally reaches the moment of exhaustion — the risk premium ignored over the past three years has collectively "fought back" at this moment, delivering a fatal blow to the U.S. stock market.

The "decline" of U.S. stocks is never accidental. The real driving force behind it is the complete reversal of interest rate expectations — a earth-shaking reversal from "expectations of interest rate cuts" to "panic about interest rate hikes", which took less than three months.

Going back to early January 2026, the market was still immersed in the beautiful expectation of "interest rate cuts". Data from the CME FedWatch Tool showed that the probability of an interest rate hike at the beginning of the year was less than 3%. At the end of 2025, the market consensus was that the Federal Reserve would continue to cut interest rates in 2026 to continue "injecting blood" into the U.S. stock market. But no one expected that a sudden crisis would completely rewrite all this.

On February 28th, "Operation Epic Fury" triggered an escalation of the situation in the Strait of Hormuz — this "throat passage" that carries 20% of global oil shipments was directly threatened. Oil prices soared accordingly. On March 27th, Brent crude closed at $112.57, a year-to-date increase of 45%. Rising oil prices fueled inflation expectations, which in turn directly reshaped interest rate pricing, completely shattering the market's dream of interest rate cuts.

On March 27th, the CME futures market showed that the probability of an interest rate hike year-to-date exceeded 50%, reaching 52% — this is the first time since early 2023 that the market has shifted from "expectations of interest rate cuts" to "expectations of interest rate hikes". According to data from the Atlanta Fed's Market Probability Tracker, the probability of a 25-basis-point interest rate hike has reached 19.8%. In just three months, the probability of an interest rate hike has soared from nearly zero to more than half. What was once discussed as "multiple interest rate cuts" has now become "whether to raise interest rates", and the market's panic was instantly ignited.

What is even more surprising is that in this wave of decline, the hardest hit is not Tesla, which has the biggest fluctuations and the most controversies, but Microsoft, which has always been regarded as a "stable representative" — this surprised many people.

According to data from Techi.com and Motley Fool, Microsoft has fallen 35.7% from its peak in July 2025 (around $534), making it the largest percentage drop among the seven major tech giants from their historical highs; Tesla ranks second with a 26.4% drop, and NVIDIA ranks third with a 21.2% drop. Why did Microsoft fall the hardest? The answer lies in the valuation.

Looking at the forward price-to-earnings ratio (P/E ratio), the mystery is revealed: Tesla's forward P/E ratio is as high as 145 times, while Microsoft's is only 24 times. Microsoft fell more because the market has more "rigid" expectations for it — the "certainty premium" on it contracts the most when the market environment deteriorates. Just like a top student who is highly expected, once he makes a little mistake, he will be given the harshest punishment by the market. In contrast, Apple is the most resilient among the seven major giants, falling only 5% from its peak, but its forward P/E ratio of 29 times also means that this "safety" is not cheap.

In addition to the reversal of interest rate expectations, another "straw" that crushed the U.S. stock market is the $650 billion AI capital expenditure — not the burning of money itself, but the market's expectations for "returns" have completely cooled down.

In 2026, the seven major tech giants wrote themselves an unprecedented "investment check". According to the Q4 2025 financial guidance of each company and data compiled by Bloomberg, the total 2026 AI capital expenditure budgets of the four companies Amazon, Google, Microsoft, and Meta are approximately $650 billion, a 67% increase from $381 billion in 2025 — each company's budget this year is close to or exceeds the sum of the past three years, which can be described as a "gambling-style investment".

But the market's reaction is completely different: Amazon ($200 billion) and Google ($180 billion), which have the highest AI capital expenditure, are only down 9.5% and 9% year-to-date; while Microsoft ($145 billion) and Meta ($125 billion), which have relatively lower expenditure, have seen drops of 15% and 15.2%. The more you spend, the smaller the drop. The logic behind this is simple: the market's punishment never depends on the absolute scale of investment, but on the "visibility" of returns.

Amazon's AI investment directly serves its cash flow engine AWS, with a clear return path; Google's investment can achieve clear monetization through search advertising; but Microsoft and Meta's AI expenditures are confusing to investors — from Copilot's enterprise penetration to Meta's strategic shift from the metaverse to AI agents, none of these investments have yet been converted into tangible performance data. And the arrival of the interest rate hike cycle will not wait for these "stories" to unfold slowly. The market has no patience or confidence to wait any longer.

The flow of funds has already explained everything — smart money has begun to "vote with their feet", quietly fleeing tech stocks and turning to safer cyclical sectors.

According to monthly fund flow data from State Street Global Advisors, year-to-date 2026, net inflows into ETFs of cyclical sectors such as Energy, Materials, and Industrials have reached $19 billion, accounting for 65% of all sector ETF inflows, far exceeding these sectors' 47% market weight. According to Morningstar data, Natural Resources funds saw $7.5 billion in inflows in January, setting a monthly historical high for the sector.

Data from ETF Trends shows that cyclical sectors have an average year-to-date gain of +20%, while the Technology sector is down 6% year-to-date, and the S&P 500 as a whole is up only +0.5%. Among them, the Aerospace & Defense ETF (SHLD) saw over $10 billion in net inflows in January, with a year-to-date gain of +20%. Although the Technology sector had $6 billion in inflows in February, its return rate is still far behind that of cyclical sectors — the "change of heart" of funds has further exacerbated the differentiation and sluggishness of the U.S. stock market.

Today's U.S. stock market is in a state of "multidimensional disruption", and economists are deeply divided on the future direction. Gregory Daco, Chief Economist at EY-Parthenon, referred to the current situation as "multidimensional disruption", and he put the probability of a U.S. recession at 40%; Goldman Sachs put it at 30%, while Mark Zandi, Chief Economist at Moody's, believes the probability is close to 50%.

Three years of carnival, three months of reversal, and $650 billion in AI investment hanging in the balance of a tightening cycle. Was the $2 trillion market cap evaporation of the seven major tech giants a one-day panic sell-off, or is the market repricing for a cycle that has already concluded?

Once, the U.S. stock market was a "star" sought after by global investors and a synonym for the bull market; now, it is like a giant lost its way, struggling to move forward under the multiple pressures of interest rate reversal, unclear AI returns, and capital outflows. Is this "bear market cold snap" just a temporary adjustment, or the start of a new round of recession? Perhaps only time can give the answer, but it is certain that the "carnival era" of the U.S. stock market has temporarily ended, and a new stage full of uncertainty has already begun.