Nasdaq Extends Slide as Investors Question AI Profitability and Returns

2026-02-17 economy

New York, Tuesday, 17 February 2026.
As US markets reopen post-holiday, the Nasdaq Composite is extending its longest weekly decline since 2022. Wall Street is undergoing a pivotal ‘reality check’ regarding the artificial intelligence sector, driven by startling data that only 14% of CFOs saw measurable returns on AI investments last year. This skepticism over valuation and monetization is triggering a rotation into defensive assets, as doubts linger despite massive capital spending projections from tech giants.

Tech Sector Leads Market Downturn

Trading resumed on Tuesday with immediate pressure on technology equities, continuing a bearish trend that has gripped Wall Street. Upon the opening bell, the Nasdaq Composite dropped 151.9 points to 22,394.756, a decline of 0.67% [2]. This extends the index’s trajectory into its longest weekly slide since 2022 [1]. The S&P 500 also faltered, falling 0.24% to 6,819.86 and breaching a significant technical level: its average price over the past 100 days [1][2]. In contrast to the tech-heavy indices, the Dow Jones Industrial Average showed resilience, rising 24.4 points, or 0.05%, at the open [2].

The High Cost of Artificial Intelligence

The sell-off is underpinned by a growing disconnect between the massive capital expenditures required for artificial intelligence infrastructure and the actual returns generated. By the end of 2025, only 14% of Chief Financial Officers reported measurable returns on their AI investments [7]. Despite this slow monetization, spending remains aggressive; Amazon and Meta Platforms are projected to spend over $650 billion on data centers in 2026 [7], while the four largest hyperscalers are set to pour more than 2% of the entire U.S. GDP into AI-related capital expenditures this year [4]. This imbalance has led experts to suggest the AI trade is “stalling” rather than crashing, as investors demand higher returns on investment to justify the escalating costs [4].

Software Stocks Bear the Brunt

The skepticism is most acute within the software vertical, where investors fear disruption from autonomous AI agents. The iShares Expanded Tech-Software Sector ETF has plummeted approximately 22% year-to-date [3]. This represents a significant underperformance compared to the broader Technology sector, which is down roughly 2.5% year-to-date [3], a difference of 19.5 percentage points. Individual heavyweights are not immune; Microsoft has dipped 16% year-to-date, while Salesforce and Adobe have recorded declines between 15% and 20% [7]. On Tuesday, the pressure widened to hardware as well, with a key gauge of chipmakers, including Nvidia Corp. and Broadcom Inc., slipping 2.1% [1].

Defensive Rotation and Global Risks

As confidence in the tech growth narrative wavers, capital is rotating into cyclical and defensive industries. While tech struggles, non-tech sectors such as Energy, Consumer Staples, and Materials have surged by double-digit percentages year-to-date [3]. Broader market sentiment is also being dampened by geopolitical anxieties, specifically regarding developments in nuclear talks between the United States and Iran [2]. In other asset classes, Bitcoin sank 3% and gold tumbled, reflecting a broader liquidation mindset among traders [1]. With the Nasdaq 100 stagnant since October 2025, the market is now looking toward the March earnings cycle as a critical test for the AI value proposition [4][7].

Sources

Artificial Intelligence Tech Sector