Equity investors are meting out some of the harshest punishments ever for companies that miss expectations, just as strategists sound the alarm that earnings growth has likely peaked.

Amazon.com Inc. became the latest firm to face sharp post-earnings selloffs Thursday after the close, following disappointing results from Google-parent Alphabet Inc. that sent its shares to a record drop. Investors in communications services stocks are now penalizing misses with the steepest selloffs since Bloomberg began collecting data in 2019. The same dynamic is playing out in the heavily-weighted tech sector.

The market is “a lot more sensitive than it might normally be,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management, adding that investors would rather sell first and ask questions later rather than get stuck nursing further losses.

Strategists from Wells Fargo to Franklin Templeton were among those in recent weeks predicting the S&P 500 corporate earnings expansion would decelerate as higher interest rates, tariff pressures and elevated oil prices weigh on results. Roughly a third of the way through the reporting season, their forecasts have proven on point: Earnings growth has slipped to roughly 26% — still elevated compared with historical norms but below the 32% growth rate seen in the second quarter, the data show.

The earnings slowdown is being led by the market’s largest sector. Tech profit growth is seen decelerating to 65% in the third quarter, from nearly 77% last quarter, according to Bloomberg Intelligence. Similarly, communications services is expected to slow to just 3.2% from nearly 10%.

The post-earnings plunges are reinforcing fears that the best quarters, particularly for AI-linked companies, are in the rear-view mirror.

“If you’ve got 50% of the market in those two sectors, people want extra, they want more validation that this trade is still in tact,” said Keith Lerner, chief investment officer and chief market strategist at Truist Advisory Services. A slowdown in growth challenges the narrative, he said.

Indeed, the tech and communications sectors are the only two in the red this month, while every other corner of the market has advanced.

Kimberly Forrest, chief investment officer at Bokeh Capital Partners, said investors are “trimming some of their excessive gains” in tech to pick up cheaper stocks elsewhere, rather than completely selling out of an equities market that is still poised to grow earnings, even if it’s at a slower rate.

S&P 500 earnings growth is set to track closer to 20% over the course of 2027 and into the first quarter of 2028, according to Bloomberg Intelligence estimates. That’s above the 10% threshold that has historically been required for the market to continue advancing after a peak in growth, according to Jeff Schulze, head investment strategist at the Franklin Templeton Institute.

“What matters more than peak earnings is what your earnings growth is in the year following that peak,” Schulze said. Given the outlook, he said that “if we just grow into the earnings expectations that are out there for 2028, we could have an S&P 500 that delivers high single digit, low double-digit returns in 2027.”Still, the problem for investors is also deeper than simply earnings slowing down. So far, S&P 500 members are beating Wall Street estimates at the lowest rate this year, and that’s true across multiple sectors including tech, consumer discretionary and financials.

Investors are in no mood to let companies off the hook for misses. “If earnings are less than expected in one particular area, I think you’ll see a rapid repricing across all the related areas,” Zaccarelli said.