Major U.S. indices failed to sustain momentum above critical support levels, with the S&P 500 and Nasdaq-100 closing lower amid growing skepticism over AI-driven valuations. Nvidia, despite reporting quarterly revenue of $26.0 billion and a 24% year-over-year increase, saw its shares drop 8.3% on the week as investors questioned the sustainability of its growth trajectory.
- S&P 500 closed below 5,100, marking a key technical breakdown
- Nasdaq-100 (QQQ) dropped 3.7% for the week, its worst weekly performance since late 2023
- Nvidia (NVDA) reported $26.0B in quarterly revenue, 24% YoY growth, but fell 8.3%
- NVDA's EPS of $2.97 beat estimates by 12%, yet shares declined due to valuation concerns
- Technology sector dropped 4.8%, semiconductors fell 6.1% on weak breadth
- Increased investor caution over AI-driven valuations despite strong earnings momentum
The U.S. equity markets struggled to maintain bullish momentum as the S&P 500 (SPX) closed below the 5,100 threshold, marking the first weekly close below that level since October 2024. The Nasdaq Composite (QQQ) also retreated, ending the week down 3.7%, its worst performance in seven weeks. Both indices failed to hold key technical levels that had served as support during recent rallies, signaling potential short-term bearish momentum. Despite Nvidia (NVDA) reporting fourth-quarter revenue of $26.0 billion—exceeding analysts’ expectations by 8.5% and up from $21.0 billion in the same period last year—the stock declined 8.3% over the week. The company’s earnings per share of $2.97 surpassed estimates by 12%, and guidance for the next quarter remained robust, yet investor sentiment turned cautious. This divergence highlights a growing concern that AI-related stock valuations may have become detached from fundamental performance. Market breadth weakened significantly, with the number of NYSE stocks closing lower exceeding those gaining by more than 3-to-1. The technology sector, which represents over 30% of the S&P 500’s weight, fell 4.8%, while semiconductor sub-indicators dropped 6.1%. The sell-off extended beyond Nvidia, with Advanced Micro Devices (AMD) and Broadcom (AVGO) each losing over 5% on the week, reflecting broader profit-taking in AI infrastructure stocks. The shift in sentiment suggests that while AI remains a long-term growth theme, near-term valuation pressures and concerns about margin compression in chip demand are gaining traction. Institutional investors are reassessing exposure to high-growth tech, particularly in sectors reliant on speculative AI spending. The sell-off underscores the market’s sensitivity to any perceived overreach in tech valuations, even amid strong earnings.