Nasdaq and S&P 500 dip in the midst of AI worries

Overview

As investors waited for market giant Nvidia’s results and fretted about the demand for equipment underpinning artificial intelligence, the Nasdaq Composite slid more than 1% on Monday, with large technology firms acting as the largest drag. The Dow managed to squeeze out a small gain, but the S&P 500 ended the day marginally lower, marking its third consecutive day of declines. Additionally, it was the third straight loss for the Nasdaq and the fourth time in February that it had dropped more than 1% in a single day.

Friday’s sharp drops ended a negative week for stocks, which was characterized by data indicating that American firms and consumers are growing uneasy about Trump’s tariff proposals. President Donald Trump said at a news conference on Monday that tariffs on Canada and Mexico would “go forward on time, on schedule,” when a one-month postponement ends next week.

AI worries shadow US markets

As they awaited Nvidia’s quarterly reports on Wednesday, investors were worried about the company’s ability to meet future demand for its expensive AI chips. Since China’s DeepSeek shocked the industry in January with its low-cost AI models, concerns about significant spending on the technology have grown.

Uncertainty was increased when a TD Cowen analyst note revealed late Friday that Microsoft has canceled leases for sizable data center capacity in the US, raising the possibility of an excess of AI infrastructure. Microsoft stated that while it “may strategically pace or adjust” infrastructure in some areas, its ambition to invest more than $80 billion in AI and cloud capacity this fiscal year remains intact.

Gene Goldman, chief investment officer at Cetera Investment Management, stated that since AI has been driving market rise in recent years, any issue about the technology is viewed as a justification to reduce profits. Goldman noted that markets are already anxious and searching for an excuse to take profits. Further, according to Goldman, market hesitancy on whether we are facing an inflation or growth scare is what is driving volatility.

Following a poor projection from Walmart and a slew of negative economic data this week, investors are growing increasingly concerned about economic growth in addition to tariffs and inflation.

US market performance

The S&P 500 dropped 29.88 points, or 0.50%, to 5,983.25; the Nasdaq dropped 237.08 points, or 1.21%, to 19,286.93; and the Dow Jones Industrial Average increased 33.19 points, or 0.08%, to 43,461.21.

Tech drove US market down

Technology was the largest loser, closing down 1.43%, while the more defensive healthcare index led percentage gains, closing up 0.75%. The largest index point drag on the S&P 500 was Nvidia, which ended the day down 3.1%. Broadcom Inc., a chip manufacturer, opened a new page, down 4.9%, and Amazon.com, down 1.8%. Microsoft’s stock fell 1% in the end. Another well-known AI stock, Palantir Technologies, saw the largest percentage reduction in the tech sector, falling 10.5%. Though these businesses are still excellent stocks, the AI tech industry’s supremacy has ended. According to Peter Boockvar, CIO at Bleakley Financial Group, the market is about to enter a significant digesting phase.

Inflation data out this week

Regarding statistics, the Federal Reserve’s favored inflation indicator, the Personal Consumption Expenditure index, is anticipated on Friday and may aid markets in determining when the central bank may decrease interest rates for the first time this year.

Fed Rate Stability Expected Until June, Stocks Gain on Key Announcements

According to CME Group’s FedWatch, which launches a new tab feature, interest rate futures show traders’ views that the Fed would keep borrowing prices the same until June. Following the iPhone manufacturer’s announcement of plans to invest $500 billion in the United States over the next four years, including the establishment of an AI server facility in Texas, individual stocks ended the day up 0.7%. After Warren Buffett’s conglomerate announced a record yearly profit, Berkshire Hathaway’s class B shares ended up more than 4%, and the company’s shares reached record highs in early trade.

Conclusion

The U.S. overall stock market did not do well, with the Nasdaq declining over 1% due to concerns regarding demand for AI gear, economic growth, and tariffs. Tech stocks, and especially those that deal in AI, were hammered, with the Dow managing only a small gain. Some stocks were boosted by positive news from Apple and Berkshire Hathaway, but investors are waiting until inflation figures and Nvidia’s quarterly results are announced. Market sentiment is still cautious, with most waiting until there are more positive economic indications.