Nasdaq Plummets Over 1% Amid AI Demand Concerns
NEW YORK, Feb 24 (Reuters) – The Nasdaq Composite saw a decline exceeding 1% on Monday, primarily driven by a downturn in large technology stocks. Investors appeared to be concerned about the continuing demand for technology used to support artificial intelligence.
The S&P 500 also closed lower, marking its third straight day of losses, while the Dow Jones Industrial Average managed a modest gain. It was the Nasdaq’s third consecutive loss and its fourth daily drop of more than 1% so far in February. Investors are closely awaiting financial results from market heavyweight Nvidia, which contributes to market volatility.
AI Demand Concerns Weigh on Tech Sector
Investors are showing caution about the future demand for Nvidia’s (NVDA.O) pricey AI chips as the company’s quarterly results are set to be released. Concerns about the substantial expenditures associated with this technology have increased, particularly since the emergence of low-cost AI models from China’s DeepSeek in January. This adds to an already complex market situation.
Further clouding the outlook, a TD Cowen analyst’s note pointed out that Microsoft Corp (MSFT.O) has reportedly cancelled leases for significant data center capacity in the U.S. This suggests a possible oversupply of AI infrastructure. Microsoft stated that it still intends to invest heavily in AI and cloud capacity, but that it might modify its pace of investment in infrastructure in some areas.
“Markets are already jittery and looking for a reason to take profits,” said Gene Goldman, chief investment officer at Cetera Investment Management, noting that any question about AI is seen as a reason to take profits since the technology has driven market growth for the last few years.
Broader Market Context
Adding to these concerns, investors are also anxious about growth after recent disappointing economic data and a weaker forecast from Walmart. “Volatility is being driven by market uncertainty about whether we’re facing a growth scare or an inflation scare,” Goldman stated.
The Dow Jones Industrial Average (.DJI) increased by 33.19 points, or 0.08%, to reach 43,461.21. The S&P 500 (.SPX) decreased by 29.88 points, or 0.50%, closing at 5,983.25, while the Nasdaq (.IXIC) dropped 237.08 points, or 1.21%, finishing at 19,286.93.
Healthcare (.SPXHC) was the leading sector, up 0.75%, while technology (.SPLRCT) lagged, closing down 1.43%. Nvidia was the most significant negative influence on the S&P 500.
Individual Stock Performances
Nvidia ended the session down 3.1%, followed by Broadcom Inc (AVGO.O), which fell 4.9%, and Amazon.com (AMZN.O), down 1.8%. Microsoft shares declined by 1%.
Another popular AI stock, Palantir Technologies (PLTR.O), experienced a significant drop of 10.5%. “The dominance of the AI tech trade has run its course, not that these companies aren’t great stocks. We’re headed for a major digestion phase,” said Peter Boockvar, CIO at Bleakley Financial Group.
Apple (AAPL.O) rose 0.7% after announcing a $500 billion investment in the U.S. over the next four years, including establishing a factory in Texas for AI servers. Berkshire Hathaway (BRKa.N) reached record highs in early trading, after Warren Buffett’s conglomerate reported record annual profit. Nike (NKE.N) rose 4.9% after Jefferies upgraded its rating to “buy.”
Economic Indicators and Market Outlook
The Personal Consumption Expenditure index, the Federal Reserve’s preferred inflation gauge, is expected to be released on Friday and could influence market expectations regarding when the central bank will implement its first rate cut this year. Interest rate futures suggest that traders anticipate the Fed will maintain the current borrowing costs until June, according to CME Group’s FedWatch tool.
On the NYSE, declining issues outpaced advancers, and a 1.9-to-1 ratio was recorded on Nasdaq. The S&P 500 saw 28 new 52-week highs and 8 new lows, while the Nasdaq recorded 40 new highs and 232 new lows.
