Wall Street Ends Lower as Tech Rally Stalls

U.S. stocks turned sharply lower Thursday, the day after earnings from artificial intelligence vanguard Nvidia failed to impress investors, weighing down technology shares which have provided muscle to the recent rally.

A pivot back to cyclical sectors helped keep the Dow close to even, while a drop in the Philadelphia SE Semiconductor index dragged the tech-laden Nasdaq down the most.

With Thursday's drop, the SOX, which has surged year-to-date, was on the verge of snapping what would have been a record 11-week winning streak.

Technology shares in general, and software and chips in particular, have see-sawed in recent weeks as investors wrestle with uneasiness over the massive costs and potential disruption of nascent AI technology.

While all three major U.S. stock indexes are on track for modest weekly losses, the S&P 500 and the Nasdaq are poised to close lower on the month. The Dow remains on track to post an advance in February.

Nvidia's fourth-quarter results, posted after Wednesday's closing bell, were better than analysts expected, and the chipmaker provided above-market estimates.

But the world's richest company by market cap wrestled with increasingly difficult year-on-year comparisons as its revenue growth decelerates.

"It feels like an Nvidia hangover that's specific to the AI space," said Michael Green, chief strategist at Simplify Asset Management in Philadelphia. "The S&P itself is being dragged down by Nvidia and the Magnificent 7, and the Nasdaq is really getting hammered."

"It's as simple investors being levered long in Nvidia and short the AI disruption," Green added. "And when that failed to materialize in a large enough scale, they sold out of their position, driving Nvidia down and pushing the stocks they were short back up."

According to preliminary data, the S&P 500 lost 37.12 points, or 0.53%, to end at 6,909.01 points, while the Nasdaq Composite lost 272.93 points, or 1.18%, to 22,879.14. The Dow Jones Industrial Average rose 18.61 points, or 0.04%, to 49,500.76.

The S&P 500 software and services index gained ground after being battered in recent weeks on worries of possible disruption from AI. The index got a boost from Salesforce shares, even though the company provided weaker-than-expected revenue guidance.

Trade Desk slid following its disappointing revenue forecast amid mounting pressure from larger rivals. J.M. Smucker surged on the packaged food company's solid quarterly profit and sales estimates.

C3.ai tumbled after it provided a weaker-than-expected current-quarter sales forecast and announced it would slash 26% of its global workforce.

Celsius Holding jumped after the energy drink maker beat quarterly revenue estimates.