Market Summary - February 26, 2026
Key Highlights
- Nvidia's earnings report leads to a significant sell-off in US tech stocks.
- The Magnificent 7 tech stocks are now referred to as the Maleficent 7 due to their losses.
- Investors are moving away from US tech stocks, with a notable shift towards defensive sectors.
- Software stocks are experiencing a rotation, showing resilience amidst the broader tech sell-off.
- The UK gilt market is reacting to the upcoming Gorton and Denton byelection results.
Nvidia's Earnings Report and Market Reaction
On February 26, 2026, US markets experienced a sell-off despite Nvidia reporting strong earnings. The Nasdaq index fell by 1.5%, with Nvidia's shares dropping over 4.5%, resulting in a $200 billion loss in market capitalization. Historically, Nvidia has shown a tendency to decline post-earnings, with a notable 8% drop following its earnings report last year. Despite expectations of robust revenue and positive guidance, the market reacted negatively, indicating a lack of confidence in the sustainability of AI demand.
The Maleficent 7
The sell-off extended beyond Nvidia, affecting other major tech companies such as Broadcom, Amazon, Google, and Tesla. Collectively, these companies lost nearly $400 billion in market capitalization, prompting a rebranding of the Magnificent 7 to the Maleficent 7. While Nvidia remains the most valuable company, Apple is closing in on regaining its top position.
Shifts in Investor Sentiment
The overall sentiment towards tech stocks has shifted, with the S&P 500 tech sector down more than 2%. In contrast, sectors such as financials, energy, and real estate are performing well. Interestingly, traditional defensive sectors like consumer staples and utilities are not benefiting from this sell-off, suggesting that investors are not merely rotating into defensive stocks but are actively divesting from tech.
Software Stocks Show Resilience
Amidst the broader tech sell-off, software stocks have shown some resilience, with companies like IBM, Gartner, GoDaddy, Applovin, and ServiceNow experiencing gains. This indicates a potential rotation within the tech sector, as fears surrounding AI investments have shifted focus from semiconductors to software companies. The market appears cautious about the ability of hyperscalers to maintain capital expenditure growth, reflecting a broader concern about the AI trade.
UK Gilt Market and Political Implications
In the UK, the gilt market is reacting to the anticipated results of the Gorton and Denton byelection, which is seen as a referendum on Labour leader Kier Starmer's leadership. The outcome of this election could have significant implications for the political landscape, with potential repercussions for the pound and UK bonds. As of now, UK gilts are performing well, suggesting market expectations of a Labour victory, albeit with caution regarding the potential for a change in leadership if the results are unfavorable.
Conclusion
The market's reaction to Nvidia's earnings highlights a broader trend of caution among investors regarding tech stocks, particularly in the context of AI demand. As the political landscape in the UK evolves, market participants are closely monitoring the implications for both currency and bond markets.