US Bank Stocks Plunge Amid Private Credit and AI Concerns
US bank stocks are experiencing their steepest decline since concerns over Donald Trump’s tariffs rattled markets in April 2024, as anxieties mount regarding lenders’ exposure to a potential downturn in private credit fueled by fears surrounding AI disruption. The KBW bank index, encompassing major US banks like JPMorgan, Citi, and Bank of America, fell 5.8% on Friday, February 26, 2026, marking its largest daily drop since April 2024 [1].
Major Banks Suffer Losses
Goldman Sachs led the decline, sliding 7.5%, followed by Wells Fargo with a 6.4% loss and Morgan Stanley falling 6.9%. These declines coincide with a weak start to the year for US private capital giants involved in lending to software companies and holding their equity.
KKR Reports Troubled Loans
On Thursday, a large credit fund managed by KKR reported an increase in troubled loans and decreased investment income, intensifying investor concerns about the health of private markets. KKR, Ares, and Apollo all experienced declines exceeding 5% on Friday, whereas Blackstone fell 3.3%.
Private Credit Exposure a Key Concern
“The concern [for banks] is their exposure to private credit,” stated Jim Caron, chief investment officer for Morgan Stanley Investment Management’s Portfolio Solutions.
UK Mortgage Provider Collapse Adds to Pressure
US lenders are also working to assess potential losses from billions of pounds lent to a UK-based mortgage provider that collapsed due to fraud allegations. Companies including Barclays, Jefferies, and Apollo’s Atlas SP Partners provided £2 billion in financing to Market Financial Solutions, which entered insolvency on Wednesday amid accusations of double-pledging collateral.
Tech Stocks and US-Iran Conflict Weigh on Markets
US tech stocks also fell on Friday, heading for their worst month in nearly a year, as investor fears about the economic impact of AI combined with concerns over the US-Iran conflict. The Nasdaq Composite declined 1.2%, with February losses totaling approximately 4%. The S&P 500 dipped 0.8%, putting both indices on track for their worst week since March 2025.
AI Disruption Fears Drive Sell-Off
The stock sell-off has been “driven by a bearish narrative that AI would eliminate most white-collar jobs and eventually lead the economy into collapse,” according to analysts at Bank of America. They acknowledge the narrative contradicts economic theory but note that “crowded positioning” in the stock market is amplifying the market moves.
Oil Prices Rise Amid Geopolitical Tensions
Investor nerves regarding a potential US military strike on Iran contributed to the stock market decline, driving up oil prices. The international benchmark Brent crude climbed 2.8% to $72.70 a barrel on Friday.
Tech Spending and Earnings Under Scrutiny
Concerns persist regarding the scale of corporate spending on AI infrastructure and doubts about when it will translate into profits. Despite stronger-than-expected revenues and profits reported by Nvidia, its share price fell more than 2% on Friday, adding to a 5.5% drop on Thursday.
Capex Intensity and Profit Margins
Rushabh Amin, a fund manager at Allspring Global Investments, noted that “capex intensity is under scrutiny” and “earnings are no longer being rewarded as they were,” as investors seek evidence of tech company spending translating into improved profit margins.
Treasury Yields Fall as Investors Seek Safety
US 10-year Treasury yields fell 0.04 percentage points to 3.97% as investors sought safe-haven assets, extending a strong run for government debt despite persistent inflation. “When the going gets tough and investors need liquidity and safety against risk, the asset that performs best is US Treasuries,” said Edward Al-Hussainy, a portfolio manager at Columbia Threadneedle.