MW Why the S&P 500 was doomed to fall when Nvidia plunged after its earnings

By Christine Idzelis

Investors worry about Big Tech valuations being inflated relative to what they're actually worth, say strategist

Nvidia and other Big Tech shares sold off Thursday, making it hard for the S&P 500 to advance.

Nvidia Corp. has the heft to make or break the U.S. stock market - and on Thursday the technology giant dragged down the S&P 500.

Despite Nvidia's (NVDA) blowout earnings report Wednesday, shares of the artificial-intelligence chip maker had their worst day in months, and the selloff rippled across the market.

Information technology, the S&P 500's largest sector, slumped 1.8% under the weight of Nvidia, with the company losing $259 billion in market value as the stock took its biggest dive since last April, according to Dow Jones Market Data. More broadly, the S&P 500 index SPX fell 0.5% to snap back-to-back gains, while the tech-heavy Nasdaq Composite COMP dropped a sharp 1.2%.

Nvidia is "a big heavyweight" in the S&P 500 at around 8% of the index, so when it drops, it hurts the U.S. equities benchmark, according to Katie Stockton, a chartered market technician and founder of research firm Fairlead Strategies.

Nvidia's earnings results also didn't assuage the stock market's broader concerns about Big Tech's tremendous spending on artificial intelligence, with investors anxious about how much megacap companies are raising their capital-expenditure budgets on AI and the uncertainty about the return on that investment further down the road, according to Kevin Gordon, head of macro research and strategy at Charles Schwab.

Big Tech held back gains for the S&P 500, making it difficult for the index to advance Thursday, even as other parts of the market broadly climbed, Gordon said in a phone interview. "This is just how the index math haunts you."

"You can look across the board on solid results, but I think it's become the new normal in terms of this pushback on a lot of the spending on AI," said Gordon. Investors remain worried about whether Big Tech valuations are inflated relative to "what they're actually worth," he added.

Meanwhile, Nvidia is the biggest weight in both the S&P 500 and Nasdaq 100 index NDX QQQ, with its massive market value having the heft to move the market and influence sentiment, Stockton at Fairlead Strategies said.

Investors had run up Nvidia's stock in the lead-up to its highly anticipated earnings report released after the stock market's closing bell Wednesday, said Stockton. "From a sentiment perspective," expectations on the part of investors were "clearly quite high."

Market sentiment surrounding AI and Big Tech soured Thursday, with shares of Google parent Alphabet Inc. $(GOOG)$ $(GOOGL)$ also seeing a sharp selloff.

"Blips" higher in the S&P 500's tech sector XX:SP500.45 "aren't being maintained," cautioned Stockton. "If we lose market breadth" and Big Tech stocks aren't there "to pick up the slack," that would be "problematic" for the S&P 500, she said.

Still, Nvidia "delivered another stellar set of results that make the extraordinary seem ordinary," TD Cowen analysts said in a note Wednesday. But "given the material upward revisions in hyperscale capex expectations over the last five weeks, investor expectations were likely elevated coming into the print."

Big Tech selloff

The Roundhill Magnificent Seven ETF MAGS - an exchange-traded fund that holds Apple Inc. $(AAPL)$, Microsoft Corp. $(MSFT)$, Alphabet, Nvidia, Amazon (AMZN), Tesla $(TSLA)$ and Facebook parent Meta Platforms (META) - fell 1.6% on Thursday.

Shares of Nvidia dropped 5.5%, snapping a four-day winning streak and leaving the company with a market value of $4.49 trillion, according to Dow Jones Market Data. That company was the worst performer in the Roundhill Magnificent Seven ETF, with Meta and Microsoft the only two stocks held by the fund that ended the day's trading in positive territory, according to FactSet data.

Investors on Thursday also were weighing earnings reports from software companies Salesforce (CRM) and Snowflake (SNOW), which both closed sharply higher Thursday.

The software sector broadly outperformed semiconductor stocks, with the iShares Expanded Tech-Software Sector ETF IGV gaining 2.2%, while the iShares Semiconductor ETF SOXX dropped 3%, according to FactSet data.

But an upbeat day for software stocks and other areas of the S&P 500 weren't enough to offset the damage from Big Tech.

The three sectors in which Big Tech resides, including information technology, communication services XX:SP500.50 and communication discretionary XX:SP500.25, make up 55% of the S&P 500, said Gordon. That left the S&P 500 down Thursday, even as the Invesco S&P 500 Equal Weight ETF RSP - which equally weighs stocks in the index - finished the day with a 0.6% gain.

-Christine Idzelis

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February 26, 2026 17:15 ET (22:15 GMT)

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