• The S&P 500 tech sector hit over two-month lows on February 2, 2026, dropping 3.1% as Nvidia (NVDA)'s stalled $100 billion OpenAI investment deal and profit-taking in high-valuation stocks fueled broader market weakness.
  • Nvidia shares fell sharply after a Wall Street Journal report indicated the OpenAI investment had stalled, though the company plans alternative investments; this weighed on the sector ahead of earnings from AMD (AMD) and Alphabet (GOOGL).
  • Despite the slump, tech earnings revisions remain robustly positive, with long-term growth projections strong amid AI-driven capex forecasts, but short-term volatility looms from upcoming earnings reports.

A Sharp Reversal for Tech Stocks

The S&P 500 tech sector tumbled to its lowest level in over two months on February 2, 2026, closing down 3.1% in a session marked by broad market jitters. This decline contributed to the S&P 500 falling 0.32% and the Nasdaq declining 0.53%, a stark contrast to the record highs earlier in 2026 that were fueled by relentless AI optimism. According to people familiar with the matter, the selloff was triggered in part by Nvidia's stalled $100 billion investment deal with OpenAI, as reported by the Wall Street Journal, though Nvidia is said to be eyeing alternative investments to maintain its AI momentum.

Efforts to sustain the tech rally have hit a snag, with profit-taking in high-valuation stocks exacerbating the downturn. Without a swift recovery, the sector could face further pressure as investors reassess risk appetites. AMD is set to report earnings after the close on February 2, with analysts expecting EPS of $1.32 and revenue of $9.67 billion, while Alphabet follows on February 3. Pre-market, AMD shares were up 5% on robust server demand expectations, but the overall mood remains cautious.

Market Dynamics and Political Crosscurrents

This tech slump reflects what some analysts describe as a "two-speed" market, where AI hyperscalers like Nvidia and semiconductor players benefit from projected $600 billion in AI capex, while legacy firms such as Intel (INTC) lag—down 16% since its January outlook. Broader trends include fund flows shifting toward international and emerging markets, alongside a Russell 2000 breakout, but Bitcoin's drop below $77,610 amid dollar strength added to the risk-off sentiment. President Trump's pick for Federal Reserve chair, Kevin Warsh, has strengthened the U.S. dollar, reducing appeal for assets like Bitcoin and pressuring tech stocks further.

In a brief statement, a spokesperson for Nvidia declined to comment on the OpenAI deal specifics but emphasized the company's commitment to advancing AI investments. Attempts to reach Alphabet for pre-earnings insights were unsuccessful. The fiscal stimulus from the "One Big Beautiful Bill Act" (OBBBA), with tax cuts on tips and overtime and higher SALT deductions, is boosting consumer spending, which may indirectly support tech through economic resilience, but it's not enough to offset immediate headwinds.

Looking Ahead with Caution

Short-term, volatility is expected from the flurry of earnings reports, with Bitcoin potentially testing lows between $60,000 and $30,000 if dollar strength persists. Long-term, tech EPS growth is projected at +25.4% for FY2025, accelerating to +31.1% in FY2026, driven by AI integration and sustained capex. Analysts like those at RBC anticipate AMD may beat estimates, while Raymond James recently upgraded Alphabet to a strong buy with a $400 target. Nvidia's late-February results will be key for gauging the durability of the "AI Supercycle."

As of February 2, the S&P 500 IT sector value stood at 5,613.82, with a one-year return of 25.47%, underscoring the sector's resilience despite recent dips. Retail "AI-first" investors and institutions continue to favor growth stocks, ignoring sell-offs in sectors like healthcare, but this rotation risks widening gaps for non-AI players. In related developments, Amazon (AMZN)'s FY2025 EPS outlook has been revised up by 30% to $7.17, hinting at underlying strength. For now, the tech sector navigates a fragile phase, with all eyes on earnings and deal flows to dictate the next move.