Wall Street's post-holiday welcome was decidedly unwelcoming on Tuesday, as investors resumed selling battered technology shares and pushed the Nasdaq Composite further into the red for 2026. A widely followed index tracking semiconductor names—including Nvidia Corp. and Broadcom Inc.—slipped 1.2%, adding to weeks of pressure that have characterized the market's longest weekly losing streak since late 2022.
The S&P 500 edged lower by approximately 0.3%, settling near 6,815, while the Nasdaq declined more sharply, dragging both broad indices into negative territory year-to-date. The S&P 500 is now off roughly 0.7% since January, and the Nasdaq has shed approximately 1.2%. The Cboe Volatility Index, Wall Street's so-called fear gauge, remained elevated, reflecting persistent uncertainty about the path of corporate earnings in a high-tariff, high-rate environment.
The sell-off has its roots in a fundamental reassessment of artificial intelligence investment narratives that propelled tech stocks to record highs in 2025. Investors are grappling with whether the massive capital expenditure commitments made by hyperscalers—collectively exceeding $600 billion in 2026—will translate into near-term revenue gains sufficient to justify stretched valuations. Several Magnificent Seven components, including Apple and Meta, remain down more than 8% on the year, while Microsoft has shed roughly 6%.
Morningstar senior equity analyst Brian Colello noted that current semiconductor valuations look increasingly attractive for longer-term investors. Tech is selling down, Colello wrote, but if you are willing to have a bit of a longer-term view or even just willing to go against the grain, we think there are buying opportunities. His firm highlighted Nvidia's AI roadmap and Broadcom's accelerating custom silicon business as areas of structural strength not fully reflected in current prices.
In a notable divergence, small-cap stocks continued to outperform large-cap peers for the twelfth consecutive session, the longest such streak since June 2008, as domestic-focused companies in the Russell 2000 proved relatively insulated from the global AI sentiment shift. The Russell 2000 is up more than 7% in 2026, a stark contrast to the flat-to-negative performance of large-cap benchmarks. Hopes for additional Federal Reserve rate cuts and strong domestic economic data have driven the small-cap outperformance.
With Palo Alto Networks reporting fiscal second-quarter results after Tuesday's close, and Walmart and Booking Holdings due later in the week, investors will scrutinize upcoming earnings releases for evidence that enterprise technology spending remains robust enough to underpin semiconductor demand forecasts. Until those prints arrive, macro headwinds appear to be setting the tone.