Artificial intelligence semiconductor leaders closed Friday's trading session in negative territory, casting a cautious shadow over the sector as markets prepare for a holiday-shortened week. The pullback in key AI-enabling chipmakers has left investors assessing the near-term trajectory for one of the market's most prominent thematic trades.
Nvidia Corporation shares declined 2.2% by the closing bell, while Broadcom Inc. fell 1.8%. These moves contributed to broader weakness among technology names, with the Nasdaq Composite index slipping 0.22% despite the S&P 500 managing a marginal gain of 0.05%. The subdued performance occurred ahead of Monday's U.S. Presidents Day market closure, which typically results in thinner trading volumes and can amplify price movements.
Software Sector Sell-Off Weighs on Sentiment
Market sentiment faced additional pressure from a significant downturn in the software sector. According to a Reuters report, the S&P 500 Software & Services index has lost approximately $2 trillion in market value since its peak in October 2024. Notably, about half of that decline has occurred within the past two weeks alone. Analysts attributed part of the recent selling to concerns sparked by new AI-powered products, such as a legal AI plug-in from Anthropic, which raised fears about automation disrupting traditional software and service business models.
"With fear driving market sentiment, investors remain in 'sell first think later' mode," commented Barclays equity strategist Emmanual Cau in the Reuters report. This risk-off behavior has particularly impacted crowded trades, where fund managers often reduce exposure by selling large, liquid positions first, regardless of company-specific news.
Mixed Performance Across AI Ecosystem
Other major companies within the AI investment universe showed a mixed performance at Friday's close. Advanced Micro Devices Inc. gained 0.7%, and AI server supplier Super Micro Computer Inc. edged up 0.4%. Conversely, Microsoft Corporation slipped 0.1%, and Alphabet Inc. declined 1.1%. The divergence highlights selective profit-taking and rotation within the technology sector rather than a broad-based exit.
Softer U.S. inflation data released recently increased market expectations for a potential 25-basis-point interest rate cut by the Federal Reserve in June, according to CME FedWatch data. However, this macroeconomic tailwind was insufficient to lift technology shares broadly. "Large cap tech stocks continue to be an anchor on the market," observed Michael James, managing director at Rosenblatt Securities.
Corporate and Regulatory Developments
Nvidia provided markets with additional news to digest over the long weekend. The company announced that Chief Executive Jensen Huang has canceled his planned trip to India next week, where he was scheduled to headline the India AI Impact Summit and meet with press in New Delhi. The company did not provide a detailed reason for the change in plans.
Meanwhile, regulatory scrutiny is intensifying around cloud and AI platforms. Bloomberg reported that the U.S. Federal Trade Commission has recently increased its examination of Microsoft, issuing civil investigative demands to several of the company's competitors in recent weeks. Reuters noted these requests seek details on how Microsoft bundles its AI software with other products, signaling heightened antitrust attention on the sector's business practices.
Critical Events on the Horizon
The upcoming holiday-shortened week sets the stage for potentially heightened volatility, with two major events poised to influence AI and technology stock direction. First, the Federal Reserve will publish the minutes from its January 27–28 policy meeting on Tuesday, February 18, at 2:00 p.m. Eastern Time. Market participants will scrutinize the detailed record for clues about the central bank's outlook on inflation, economic growth, and the future path of interest rates.
Subsequently, Nvidia is scheduled to report its fiscal fourth-quarter results on Tuesday, February 25, with a conference call beginning at 2:00 p.m. Pacific Time. As a bellwether for AI hardware demand, Nvidia's financial performance and forward guidance are considered critical indicators for the health of the entire AI infrastructure investment theme. Any signs of slowing payback from massive AI investments or customer budget constraints could trigger a swift repricing across the sector.
Fundamentally, the future performance of AI-related equities may hinge on corporate spending discipline and margin management. The sector has demonstrated low tolerance for any softening in business outlooks. With fewer trading sessions next week due to the holiday, ordinary market-moving headlines could have an outsized impact, especially amid potentially thin liquidity and a buildup in options market positioning heading into Tuesday's reopening.
