Nasdaq Sinks to Year Low as Software and AI Sector Concerns Drive Market Selloff - February 4, 2026

This analysis is based on Bloomberg Television’s “The Close” segment [1] published on February 4, 2026, which documented a significant market selloff affecting technology-heavy indices. The Nasdaq Composite’s decline to a year low represents the culmination of growing investor concerns about the sustainability of artificial intelligence infrastructure spending and its impact on software company valuations. The featured guests on Bloomberg’s closing bell coverage included prominent market analysts from TCW, Eli Lilly, Scotiabank, Phillips 66, Research Affiliates, Wedbush, Seaport Research Partners, Uber, and Northwestern Mutual, reflecting the breadth of concern across multiple market sectors [1].

The market environment on February 4, 2026 demonstrated notable divergence among major indices. While the Nasdaq Composite experienced its sharpest decline at -1.80%, the Dow Jones Industrial Average managed modest gains of +0.13%, suggesting a rotation away from growth-oriented technology investments toward more defensive positioning [0][3]. This sector rotation pattern indicates that investors are reassessing risk exposure in high-growth segments of the market, particularly those tied to AI infrastructure and enterprise software.

The technical indicators reveal a meaningful shift in market momentum for technology stocks. The Nasdaq Composite is currently trading below both its 20-day moving average ($23,499) and 50-day moving average ($23,384), which typically signals short-term bearish momentum according to technical analysis frameworks [0]. However, the index remains above its 200-day moving average of $21,569.64, suggesting the longer-term uptrend has not yet been fundamentally invalidated. The 52-week trading range spanning from $14,784 to $24,020 represents a 56.92% total range, indicating significant historical volatility in the index [0].

Sector performance data [0] illustrates the breadth of the technology selloff:

Sector	Daily Change	Interpretation
Technology	-2.01%	Worst-performing sector
Utilities	-4.58%	Sharp decline in defensive sector
Consumer Cyclical	-1.31%	Consumer spending concerns
Basic Materials	+1.35%	Defensive rotation beneficiary
Financial Services	+0.93%	Value sector attraction
Energy	+0.89%	Safe-haven sector flow

The Technology sector’s -2.01% decline represents the worst daily performance among all sectors, while the notable weakness in Utilities (-4.58%) suggests the selloff extended beyond technology to affect other growth-oriented segments. The simultaneous strength in Basic Materials (+1.35%) and Energy (+0.89%) confirms a flight to defensive, value-oriented positions [0].

Advanced Micro Devices (AMD) experienced its most significant single-day decline since 2017, falling approximately 17% after projecting first-quarter revenue of $9.8 billion (±$300 million) [2][4]. While this guidance technically exceeded consensus estimates, investors had anticipated stronger AI-driven guidance amid the ongoing boom in AI processor spending. This disconnect between actual results and elevated expectations represents a critical factor in the broader technology selloff, as AMD’s performance is often viewed as a proxy for AI chip demand trends.

Nvidia (NVDA) faced additional headwinds on February 4, 2026, with shares declining approximately 3.5% amid multiple concerns [0][6]. Reports emerged that Nvidia’s potential $100 billion investment deal with OpenAI had fallen apart, with OpenAI deeming Nvidia’s latest chips “not up to snuff” for AI inference purposes. Although Nvidia CEO Jensen Huang and OpenAI’s Sam Altman publicly denied strain in the relationship, market sentiment remained negative [6]. Additionally, Nvidia’s AI chip sale to ByteDance (TikTok’s parent company) faces regulatory hurdles over conditions set by the Trump administration, creating further uncertainty about the company’s growth trajectory [6].

PayPal (PYPL) declined approximately 15% after issuing a disappointing profit forecast for 2026, reflecting broader concerns about consumer spending and digital payment growth rates [0]. Chipotle (CMG) fell roughly 7% amid falling traffic and flat growth outlook, contributing to weakness in the Consumer Cyclical sector [0].

Conversely, several stocks demonstrated resilience amid the broader selloff. Super Micro Computer (SMCI) gained 9-13% after raising its annual revenue forecast on continued AI server demand, suggesting the fundamental demand thesis for AI infrastructure remains intact in certain segments [0]. Enphase Energy (ENPH) surged approximately 20% after beating profit and revenue estimates, while Columbia Sportswear (COLM) rose roughly 13% following a strong earnings beat [0].

The Wall Street Journal reported significant stress in the software loan market, with software-company loans averaging 91.27 cents on the dollar and the extra yield investors demand rising to 5.95 percentage points [5]. This widening credit spread in software-related debt instruments indicates spreading credit concerns within the software ecosystem and could serve as an early warning signal for potential financial stress among software companies reliant on debt financing.

, the two-day Nasdaq decline represents the biggest such drop since October 2025, indicating accelerating negative sentiment toward technology investments that extends beyond individual company concerns to encompass broader sector and thematic issues [2]. This pattern suggests a potential inflection point in investor sentiment toward AI-related investments.

, the divergence between the Nasdaq’s -1.80% decline and the Dow Jones’s +0.13% gain highlights a significant style rotation from growth to value investments [0]. This rotation pattern often precedes periods of sustained sector outperformance for defensive segments and underperformance for growth-oriented sectors.

, the AMD guidance miss, despite technically exceeding consensus estimates, reveals the elevated expectations baked into AI-related stock valuations [2][4]. Investors appear to be demanding increasingly optimistic guidance to justify current valuations, creating a binary risk-reward dynamic for AI-exposed companies.

, the Nvidia-OpenAI relationship uncertainty and ByteDance regulatory concerns compound the challenges facing AI chipmakers [6]. These developments suggest the AI investment thesis faces not only fundamental execution risks but also geopolitical and relationship-related uncertainties.

The technology sector faces several interconnected risks requiring close monitoring. The AI spending sustainability concern represents a systemic risk, as massive capital expenditures by major technology companies on AI infrastructure have driven significant valuation increases; if returns fail to materialize as expected, broad-based repricing could occur [1][2]. The software sector credit stress indicators [5] warrant attention, as widening spreads in software loans could signal emerging financial stability concerns that may extend beyond the technology sector. Additionally, the VIX spike of +13.98% to 20.52 indicates elevated options market volatility and near-term uncertainty [0], suggesting potential for continued short-term volatility.

Despite the selloff, several factors suggest potential opportunity for disciplined investors. The Nasdaq’s position above its 200-day moving average [0] indicates the longer-term uptrend remains technically intact, suggesting the current weakness could represent a corrective phase within a broader bull market. The sector rotation into defensive sectors [0] may provide a temporary floor for market breadth as portfolio managers reposition away from growth exposure. Furthermore, individual stock opportunities emerged, as demonstrated by SMCI’s raised guidance and ENPH’s earnings beat, suggesting selective bottom-up opportunities exist amid broad-based weakness.

Upcoming earnings reports from Amazon (AMZN) and Alphabet (GOOGL) will provide critical visibility into AI spending trajectories and could either confirm or challenge the current market selloff thesis [6]. The Federal Reserve’s policy stance and any changes to interest rate expectations could significantly impact growth stock valuations in the coming weeks.

The February 4, 2026 market action represents a significant technical and sentiment event for technology-focused investors. The Nasdaq’s decline to a year low, driven primarily by software sector weakness and AI spending concerns, signals a potential shift in market regime from risk-on AI investment to more defensive positioning. The AMD guidance miss despite exceeding consensus highlights the fragile nature of elevated expectations in the AI sector, while the Nvidia-OpenAI uncertainty adds a relational dimension to the sector’s challenges [2][4][6].

The VIX spike to 20.52 and sector rotation into defensive industries [0] confirm elevated short-term uncertainty. However, the Dow Jones’s resilience and the Nasdaq’s position above its 200-day moving average suggest the broader market structure remains constructive. Investors should monitor upcoming earnings reports from major AI spenders, software sector credit conditions, and technical indicators for potential trend reversal or continuation signals.

The software loan market stress [5] and individual company guidance challenges indicate that the current market weakness extends beyond AI-specific concerns to encompass broader software sector fundamentals. This distinction is important for investors attempting to differentiate between AI-specific headwinds and more systemic software industry dynamics.

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[0] Ginlix InfoFlow Analytical Database – Market Indices, Sector Performance, and Technical Indicator Data (2026-02-04)

[1] Bloomberg Television – “Nasdaq Sinks to Year Low as Software Stocks Weigh | The Close 2/4/2026” (https://www.youtube.com/watch?v=ryX7IhbfZis)

[2] Bloomberg – “Tech Stocks Slide for Second Day on Lingering Software, AI Concerns” (https://www.bloomberg.com/news/articles/2026-02-04/us-stocks-dip-as-amd-results-ai-concerns-weigh-on-sentiment)

[3] Investopedia – “Markets News, Feb. 4, 2026: S&P 500, Nasdaq Slide” (https://www.investopedia.com/stock-market-today-dow-jones-s-and-p-500-02042026-11899071)

[4] Reuters – “Wall Street ends down as AI worries slam tech stocks” (https://www.reuters.com/business/futures-muted-ai-jitters-batter-software-alphabet-adp-focus-2026-02-04/)

[5] Wall Street Journal – “Intensifying Tech Slide Sends Nasdaq to Worst Two-Day…” (https://www.wsj.com/finance/stocks/global-stocks-markets-dow-news-02-04-2026-3fd7a30b)

[6] Multiple Sources – Nvidia and AI Sector News (Yahoo Finance, CNBC, Investing.com, Forbes)