Wall Street ends down as AI worries slam tech stocks

Published Thu, Feb 5, 2026 · 06:03 AM

[BENGALURU] US stocks ended lower on Wednesday (Feb 4), with losses in Advanced Micro Devices, Palantir and other technology companies, as investors worried about pricey valuations and whether Wall Street’s artificial intelligence (AI) rally has reached its peak.

Alphabet fell almost 2 per cent ahead of its quarterly results after the bell. After the close, it regained 2 per cent as the company said that it was aggressively ramping up spending as it deepens its investments in the AI race.

Advanced Micro Devices tumbled 17 per cent after the chipmaker forecast quarterly revenue that disappointed investors and suggested it is having a tough time competing against AI heavyweight Nvidia. Nvidia dropped 3.4 per cent and the PHLX semiconductor index fell 4.4 per cent.

Palantir slumped almost 12 per cent, reversing sharp gains from the previous day that were driven by the AI data company’s strong quarterly sales.

“The size of the infrastructure buildout is unprecedented, and the pace of consumers and businesses adopting AI tools is also unprecedented. The stock market is having a really hard knowing where to price the stocks and what the future looks like. … The market is suddenly sceptical and concerned about it,” said Jed Ellerbroek, a portfolio manager at Argent Capital in St Louis.

Some software companies added to recent losses amid worries that rapidly advancing AI could disrupt industry incumbents. Snowflake fell 4.6 per cent and Datadog lost 3.3 per cent.

“If you have got legacy software that’s old and clunky, you’re a ripe target for AI. We are a bit bearish on software in general, with the whole impetus of AI,” said Josh Chastant, portfolio manager, public investments at GuideStone Funds.

Investors selling AI-related stocks shifted into less pricey companies that sat out the tech rally in recent years.

The S&P 500 value index gained for a fifth straight session, while the S&P 500 growth index dropped. The S&P 500 declined 0.51 per cent to end the session at 6,882.72 points. The Nasdaq fell 1.51 per cent to 22,904.58 points, while the Dow Jones Industrial Average rose 0.53 per cent to 49,501.30 points.

Even as the S&P 500 lost ground, seven of the 11 S&P 500 sector indexes rose, led by energy, up 2.25 per cent, followed by a 1.8 per cent gain in materials. Volume on US exchanges was heavy, with 24.6 billion shares traded, compared to an average of 19.9 billion shares over the previous 20 sessions.

Super Micro Computer’s shares jumped 13.8 per cent after the company raised its annual revenue forecast on sustained demand for its AI-optimised servers as companies ramp up data centre capacity.

Limiting losses in the S&P 500, shares of the drugmaker Eli Lilly rallied about 10 per cent after the company forecast 2026 profit above Wall Street expectations.

The government’s closely watched jobs report for January has been pushed back from its scheduled release on Friday due to a four-day partial government shutdown that ended on Tuesday.

In the meantime, the ADP national employment report on Wednesday showed that US private payrolls increased less than expected in January amid job losses in the professional and business services, as well as manufacturing sectors.

Advancing issues outnumbered falling ones within the S&P 500 by a 2.6-to-one ratio.

The S&P 500 posted 93 new highs and 23 new lows; the Nasdaq recorded 218 new highs and 318 new lows. REUTERS