Investors are increasingly worried that a potential slowdown in AI development could burst a stock market bubble inflated by AI hype. Bulls have poured significant cash into AI bets, leaving little room for error — those wagers must pay off quickly or prices will fall. The usual AI bellwethers are taking a hit as safety concerns compound existing valuation and momentum worries. "Investors are selling first and working out the details later," said Josh Gilbert at e Toro.

Central banks face a pivotal week with three major rate decisions, starting with the Fed on Wednesday, followed by the UK and Japan. A higher-than-expected core inflation reading has stoked bets that Fed Chairman Kevin Warsh will raise rates, likely defying Donald Trump's wishes. Meanwhile, the 10-year US Treasury yield hovering near 5% is raising alarms.

Grace Peters at JPMorgan Chase Private Bank warned that yields reaching 5% or 5.25% could cause equity market indigestion, as elevated bond yields reduce the present value of future corporate earnings.