Tech Rally Pauses as AI Investment Concerns Resurface, Nvidia Leads Retreat
US stocks experienced a mixed session on Thursday, February 25, 2026, as initial gains fueled by easing AI disruption worries were tempered by renewed concerns over the sustainability of capital expenditure in the artificial intelligence sector. While the Nasdaq Composite had enjoyed a tech-powered rally, it closed down 1.2%, and the S&P 500 dropped 0.5%.
Nvidia Earnings Fail to Fully Reassure Investors
The pullback followed Nvidia’s (NVDA) fourth-quarter earnings release on Wednesday, February 24, 2026, which, while exceeding expectations, did not provide sufficient clarity on future revenue outlook. According to Jim Reid, global head of macro research at Deutsche Bank, the lack of detail in the earnings conference call contributed to investor nervousness. Nvidia shares fell 5.4% during Thursday’s session.
AI Capex Spending Under Scrutiny
Market participants are increasingly questioning whether the rapid appreciation phase of AI investments can be sustained. Mike Zigmont, co-head of trading at Visdom Investment Group, suggested the market is realizing that “eye-popping returns” from the past couple of years may not continue, leading to some investors exiting positions. Concerns center around the substantial capital expenditure (capex) being undertaken by major tech companies – the “hyperscalers” – as they build out AI infrastructure.
Broader Uncertainty Weighs on Market Sentiment
The recent volatility reflects a confluence of factors beyond AI spending. Mika Kastenholz, global head of investment solutions at LGT Private Banking, highlighted “multiple pockets and sources of uncertainty,” including tech spending, AI disruption fears, and geopolitical upheaval. Dan Hanbury, portfolio manager at NinetyOne, noted investor concerns about Nvidia’s ability to maintain its growth rate as its core customers deplete their cash flows on AI-related capex.
Geopolitical Factors Provide Temporary Relief
A late-day rally was briefly sparked by news of “significant progress” in US-Iran nuclear talks, mediated by Oman’s foreign minister. This development led to a decline in Brent crude oil prices, which had earlier risen to their highest level since July. However, the positive impact was limited, and the broader market remained cautious.
Chipmakers and AI Infrastructure Stocks Decline
The sell-off extended beyond Nvidia to other chipmakers. Broadcom fell 3.2%, and ASML dropped 4.3%. Companies benefiting from the AI infrastructure build-out also experienced declines, including Lam Research and Applied Materials (down over 4% each), and Super Micro Computer (down 3.9%). Memory groups Western Digital and Seagate Technology each fell almost 3%.
Software Sector Shows Resilience
In contrast to the hardware sector, software stocks rallied on Thursday. Salesforce chief executive Marc Benioff dismissed concerns of an AI-induced “SaaS-pocalypse,” despite the company’s recent outlook falling short of analyst expectations. Salesforce, Gartner, Workday, and CrowdStrike all closed more than 4% higher.
Shifting Focus to AI Capex Sustainability
Richard Clode, a tech portfolio manager at Janus Henderson, observed that the debate has shifted from near-term results to the sustainability of AI capex spending. Frank Lee, global head of tech hardware and semiconductor research at HSBC, noted that while Nvidia’s results beat expectations, there was a lack of “recent narratives” about future growth areas.
Source: Yahoo Finance, February 25, 2026