By Lewis Krauskopf
NEW YORK, Feb 25 (Reuters) – The technology stock trade has stumbled out of the starting block in 2026, stemming from pressure from artificial intelligence disruption fears and the allure of groups that have lagged, but the broader market may struggle to make substantial gains without the heavyweight sector’s help.
Nvidia’s (NVDA) quarterly report on Wednesday looms as the next test for tech, as questions are being raised about whether AI-related selloffs have been too harsh and when there may be a turning point for under-pressure stocks. The semiconductor giant and world’s largest company by market capitalization is an AI bellwether, whose results and outlook could ripple widely through the industry.
AI “will continue to disrupt the world but I don’t think it’s the end of the world,” said Ken Polcari, partner and chief market strategist at Slatestone Wealth in Jupiter, Florida. “Like every industrial revolution, there will be anxiety going through it, but then when it comes out the other side, there will be new opportunities.”
The S&P 500 technology sector is down 3.5% so far this year, its worst start since 2022, when equities fell broadly as the Federal Reserve started hiking interest rates.
Within the sector, performance has diverged. Software companies have been pummeled over concerns that new AI tools will lead to upheaval for their businesses.
The S&P 500 software and services index is down 23% so far in 2026, the worst such start for the group on record. Among the biggest software decliners, shares of Intuit, which reports results on Thursday, have slumped about 46% this year. Shares of Salesforce, which reports on Wednesday, have dropped 30% this year.
Still, signs of hope for investors have emerged. While shares were hit by a research report highlighting AI-related risks, the group rebounded modestly on Tuesday as Anthropic said it had new tools it developed with some partner companies.
Two other industry groups within technology – semiconductors and equipment, and hardware – are up 7% and over 4%, respectively, in 2026.
The relative performance of semiconductor stocks compared with software has reached extreme levels.
Nvidia is also the biggest company among the “Magnificent Seven” group of megacap stocks, which include Alphabet, Apple and Tesla.
Those stocks led the way for much of the latest bull market that began in October 2022, with investors flocking to them amid the companies’ outsized earnings growth and competitive advantages.
