Major U.S. equity indexes closed a turbulent week with their steepest declines since November, as a sell-off in heavyweight technology names overshadowed positive inflation data. The Nasdaq Composite slipped 0.22% on Friday, February 15, 2026, failing to capitalize on a softer-than-expected January inflation report. The broader market weakness was concentrated in the sector that has driven gains for much of the past year.
Magnificent Seven Under Pressure
The Roundhill Magnificent Seven ETF, which tracks the market's most influential technology and growth companies, fell 1.1% on Friday. The decline was led by two of its largest components. Apple shares dropped 2.3% to close at $255.78, while Nvidia declined 2.2% to $182.81. Other members of the group also retreated, with Meta Platforms shedding 1.5% and Alphabet losing 1.1%.
Michael James, managing director at Rosenblatt Securities, noted the sector's outsized influence, stating, "Large cap tech stocks continue to be an anchor on the market." The pullback accelerated as traders reduced exposure ahead of the three-day Presidents Day weekend, with U.S. markets closed on Monday and reopening Tuesday.
The AI Investment Conundrum
At the heart of the market's anxiety is the enormous capital being deployed toward artificial intelligence infrastructure. According to recent analysis, Amazon, Google-parent Alphabet, Meta, and Microsoft are collectively projected to invest approximately $650 billion in their pursuit of AI dominance. This staggering sum has left investors questioning when, or if, these expenditures will generate acceptable returns.
Jack Herr, primary investment analyst at GuideStone Funds, characterized 2026 as a "prove it" year for AI, emphasizing that markets are demanding tangible evidence that these massive investments will pay off. The concern is that soaring costs for components like memory chips could compress profit margins before revenue from AI services materializes sufficiently.
Spillover Effects and Regulatory Scrutiny
The unease has begun spreading beyond pure technology companies. Analysts have observed what some term an "AI scare trade" emerging, particularly after Anthropic launched its legal AI plug-in. Initial selling pressure hit software firms, then rippled outward to sectors perceived as vulnerable to automation-driven disruption.
Emmanuel Cau, a Barclays equity strategist, described investor behavior as entering "sell first think later" territory. This sentiment was exacerbated by Cisco Systems, which unsettled markets with warnings about margin pressure from skyrocketing memory-chip costs.
Regulatory attention is also intensifying. The U.S. Federal Trade Commission has reportedly expanded its investigation into Microsoft, contacting competitors about licensing terms and scrutinizing how the company bundles AI tools with security and identity products. This probe adds another layer of uncertainty for tech giants navigating an increasingly complex regulatory landscape.
Corporate Initiatives and Market Catalysts Ahead
Amid the sell-off, some corporate developments aimed to provide stability. Microsoft and Ericsson announced a "Trusted Tech Alliance" on Friday, with Amazon Web Services and Alphabet's Google also participating. The initiative seeks to establish ground rules for safe technology use regardless of its origin. Microsoft President Brad Smith highlighted that governments are increasingly emphasizing "stronger technology borders" and digital sovereignty.
Investors now turn their attention to two imminent catalysts. On Wednesday, February 20, the Federal Reserve will release minutes from its January 27-28 policy meeting. Interest rate expectations heavily influence technology valuations, as they affect the discount rate applied to future earnings. Later in the week, on Wednesday, February 25 at 2 p.m. Pacific Time, Nvidia will host a conference call to discuss its fourth-quarter results. While the historical numbers are important, market participants will focus intensely on the company's forward guidance, specifically whether demand for AI infrastructure continues to translate into firm orders.
The coming sessions will test whether bargain hunters return after the long weekend or if the downward momentum persists through the Fed minutes and Nvidia's earnings report. The performance of the Magnificent Seven cohort will likely dictate near-term market direction as investors weigh the long-term promise of AI against its substantial near-term costs and growing regulatory hurdles.
