Nvidia’s Spark Fizzles — S&P Dips as Chip Stocks Take a Hit

CNBC, the Wall Street Journal, and Bloomberg contributed to this report.

Markets cooled off Thursday after Nvidia’s blockbuster numbers failed to fire up the broader tape. The S&P 500 slid about 0.8%, the Nasdaq gave back 1.5%, and the Dow more or less tread water.

Nvidia, the company that’s been carrying the AI party for months, was down roughly 5% — on track for its worst session since April — even after topping revenue and earnings estimates for the fiscal fourth quarter. The chip sell-off dragged down peers: Broadcom, Lam Research, Western Digital and Applied Materials all plunged more than 5% on the day.

There’s a short, blunt way to read Thursday: the market is picky.

“The market is very much in ‘prove it’ mode, and Nvidia just didn’t quite ‘prove it’ with these earnings,” Tom Graff, CIO at Facet, told CNBC.

He flagged worries around the company’s OpenAI tie-up and said expectations priced into Nvidia are sky-high. Translation: great prints won’t always translate into sustained rallies when investors are already betting on perfection.

Not every tech name flopped. Salesforce climbed about 3% after beating both top- and bottom-line estimates. That pop was tempered, though, when the software giant warned its fiscal 2027 revenue outlook would be softer than hoped. James Demmert, CIO at Main Street Research, summed it up: Salesforce’s quarter was solid, but the weak guidance won’t calm sellers who fear AI could displace incumbents. He also thinks the drop in software stocks has been a bit overdone.

Sector action was messy. Software stocks managed a bounce — the iShares Expanded Tech-Software ETF (IGV) rose around 1% — but it’s still nursing heavy losses: roughly 30% off its recent highs. Financials, energy and real estate offered some relief, with names like JPMorgan Chase, Exxon Mobil and CBRE among the day’s winners.

Underneath the headlines, retail traders were busy. VandaTrack data showed an avalanche of mom-and-pop buying in Nvidia during the first 80 minutes of trading — the most net retail buying in that window going back to at least 2012, per analyst Viraj Patel. But Patel cautioned that heavy selling was present too; flows were “two-way,” which helps explain the stock’s choppy session. So yes, retail piled in. But they weren’t the only ones hitting the exits.

Midday movers had their own stories. Penn Entertainment jumped about 13% after beating revenue estimates; Paramount Skydance popped nearly 10% on upbeat guidance; Cars.com cratered roughly 15% after missing on earnings and giving weaker full-year revenue guidance.

Despite the short-term turbulence, some strategists remain upbeat about the year ahead. Doug Beath, global equity strategist at Wells Fargo Investment Institute, argues the recent rotation and headline-driven volatility are part of a healthier broadening in gains — and that investors should stay nimble.

“This market chop is an opportunity for new cash in US large caps and financials,” he wrote.

Others sounded a cautionary note. Bruce Richards, chair of Marathon Asset Management, says private credit has too much exposure to software — a sector that’s been whipsawed by AI fear and headline risk. He didn’t expect a systemic contagion, but warned lenders and investors to watch their concentration.

Street strategists also parsed winners from Nvidia’s report. Evercore highlighted beneficiaries across the supply chain: Dell, Hewlett Packard Enterprise and Cisco could see tailwinds from sovereign and data-center spend, while network vendors like Arista and Ciena stand to gain from rising network budgets. CoreWeave and other GPU-cloud plays also got a mention as likely beneficiaries of continued GPU utilization.

For the chip group, the reaction was stark. Several prior high-fliers — Broadcom, Applied, Lam and Western Digital — booked 6–7% drops intraday. That left Nvidia’s peers nursing big markdowns even as the company itself posted an earnings beat and higher-than-expected guidance. A reminder: in a market crowded with bullish expectations, execution needs to be flawless.

A few other datapoints: jobless claims edged to 212,000 for the week ending Feb. 21, still within a range that suggests employers aren’t broadly laying people off. And markets broadly had rallied earlier in the day before chopping lower in the afternoon.

What’s the takeaway? Earnings season keeps producing mixed signals. Strong numbers don’t auto-translate to rallies when sentiment is fragile and expectations are already baked in. Nvidia’s report was impressive on paper; the market’s reaction suggests investors are looking beyond this quarter to whether AI-driven capex is sustainable and how it will reshape software winners and losers. For now, expect lots of headline-driven volatility and two-way trading — and don’t assume a beat buys you calm.