Nvidia slid 2.2%, Broadcom declined 3.2% and Microsoft dipped 1.1%. The S&P 500 technology index lost 1.5%, leaving it down about 1% so far in 2026, as investors grew more finicky about AI-related stocks whose valuations have been inflated by outsized gains in recent years.
Alphabet gained 1.1% the day after the Google parent surpassed Apple in market capitalization for the first time since 2019, becoming the second-most valuable U.S. company. The iPhone maker was down 0.5%.
“While AI is still hot, there are going to be winners and losers,” said Art Hogan, chief market strategist at B. Riley Wealth. “It’s become a ‘show me’ sector. Show me how you monetize this. Show me if there’s going to be a return on the capex you’re putting into your development.”
Defense stocks gained after Trump said the 2027 U.S. military budget should be $1.5 trillion, much higher than the $901 billion approved by Congress for 2026.
Lockheed Martin rose 4.3%, Northrop Grumman added 2.4% and Kratos Defense jumped 13.8%. Some defense stocks fell in the prior session, after Trump threatened to block defense contractors from paying dividends or buying back shares until they speed up weapons production. The S&P 500 and Dow Jones Industrial Average briefly hit intra-day record highs on Wednesday, and valuations remained relatively high ahead of fourth-quarter earnings season.
The S&P 500 is trading at about 22 times expected earnings, down from 23 in November, but above its five-year average of 19, according to LSEG data.
The S&P 500 climbed 0.01% to end the session at 6,921.45 points.
The Nasdaq declined 0.44% to 23,480.02 points, while the Dow Jones Industrial Average rose 0.55% to 49,266.11 points.
The number of Americans filing new applications for unemployment benefits rose moderately last week, though demand for labor remained sluggish, supporting Wednesday’s ADP employment and JOLTS figures.
Traders were focused on Friday’s crucial nonfarm payrolls report for December, which would be among the first reliable datasets after the longest U.S. government shutdown in history.
Fitch raised its U.S. growth outlook, estimating GDP expanded 2.1% in 2025 and forecasting 2.0% growth in 2026 after incorporating economic data delayed by last year’s government shutdown.
AI-related memory chipmakers lost ground after a stellar rally. SanDisk lost 5.4%, Western Digital declined 6.1% and Seagate fell 7.7%.
Ford jumped 4.7% after Piper Sandler upgraded the automaker to “overweight” from “neutral”.
Advancing issues outnumbered falling ones within the S&P 500 by a 2.4-to-one ratio.
The S&P 500 posted 43 new highs and 13 new lows; the Nasdaq recorded 133 new highs and 51 new lows.
Volume on U.S. exchanges was relatively heavy, with 16.9 billion shares traded, compared to an average of 16.3 billion shares over the previous 20 sessions.
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