Eyes on US stock market amid decline in AI stocks and Nvidia results

The American stock market has currently remained highly dependent on technology stocks. Despite the recent decline in Artificial Intelligence (AI) related stocks, the future of the market is expected to depend on the performance of the technology sector. Investors are constantly monitoring potential developments in this sector and the broader market that could impact the coming week.

Technology and AI-related stocks have been witnessing a decline for almost a month. According to a Reuters report, this decline reached a significant level this week, when the S&P 500 technology sector recorded its largest single-day decline in over six years.

There are concerns among investors that a victory for the Democratic Party in the US midterm elections could lead to a reduction in spending on data centres. These facilities are extremely important for running AI systems and played a key role in the recent rally in the stock market.

Despite the recent decline, technology remains the largest sector in the S&P 500 index. By the time the market closed on Thursday, the technology sector's share in this index was more than 35%, although its share has decreased slightly. Since a large part of the technology sector is linked to AI, the decline in AI-related stocks could affect the entire sector. This could also put pressure on the S&P 500 as the weight of technology stocks in this index is quite high. Robert Pavulic, Senior Portfolio Manager at Dakota Wealth Management, stated that weakness in AI stocks could pull down technology stocks and consequently impact the S&P 500.

The technology sector's share in the total market value of the S&P 500 is still higher than the levels recorded at the peak of the internet stock bubble during the year 2000. This demonstrates how much influence technology companies have gained in the American stock market. The impact of AI is not limited only to companies classified as technology. Large cloud and internet companies such as Alphabet, Amazon, and Meta Platforms are also spending heavily to build data centres, but these companies are classified in other sectors of the S&P 500.

The large share of the technology sector in the stock market is primarily a result of the strong growth during the American bull market that began in October 2022. Despite the recent sell-off, technology stocks have increased by more than 200% during this period, which is nearly double the overall increase in the S&P 500. Some companies benefiting from the AI boom have continued to report large profits despite recent losses.

On Friday, American stocks recovered some of their losses. Following this recovery, the S&P 500 was up approximately 8% for the year, while the technology sector had increased by about 11%. Chuck Carlson, CEO of Horizon Investment Services, stated that investors who wish to book profits still have the opportunity to take profits from their investments.

Due to the recent decline, technology stocks appear less expensive based on expected future earnings. According to LSEG Datastream, by Thursday, the forward price-to-earnings (P/E) ratio of the technology sector had fallen to 17.1. In October 2025, this ratio had reached above 32. The forward P/E ratio of the broader S&P 500 was 17.9. For the first time since 2017, the technology sector's P/E ratio was lower than the broader market this week.

Low valuation may mean that investors have already factored in many risks against technology stocks. Keith Lennar, Chief Investment Officer of Truist Advisory Services, stated that the market might already be pricing in a lot of bad news. Lennar further added that the market could move towards a situation where even a little good news could have a strong positive impact on stocks. Therefore, investors are watching to see whether the AI trade will recover or face further losses in the event of upcoming growth.