Nvidia results to test technology sector after shaky start to 2026

The technology stock trade has stumbled out of the starting block in 2026, stemming from pressure from artificial intelligence disruption fears and the allure of groups that have lagged, but the broader market may struggle to make substantial gains without the heavyweight sector’s help.

Nvidia’s (NVDA.O) quarterly report on Wednesday looms as the next test for tech, as questions are being raised about whether AI-related selloffs have been too harsh and when there may be a turning point for under-pressure stocks. The semiconductor giant and world’s largest company by market capitalization is an AI bellwether, whose results and outlook could ripple widely through the industry.

AI “will continue to disrupt the world but I don’t think it’s the end of the world,” said Ken Polcari, partner and chief market strategist at Slatestone Wealth in Jupiter, Florida. “Like every industrial revolution, there will be anxiety going through it, but then when it comes out the other side, there will be new opportunities.”

The S&P 500 technology sector (.SPLRCT) is down 3.5 per cent so far this year, its worst start since 2022, when equities fell broadly as the Federal Reserve started hiking interest rates.

Within the sector, performance has diverged. Software companies have been pummeled over concerns that new AI tools will lead to upheaval for their businesses.

The S&P 500 software and services index (.SPLRCIS) is down 23 per cent so far in 2026, the worst such start for the group on record. Among the biggest software decliners, shares of Intuit (INTU.O), which reports results on Thursday, have slumped about 46 per cent this year. Shares of Salesforce (CRM.N), which reports on Wednesday, have dropped 30 per cent this year.

Still, signs of hope for investors have emerged. While shares were hit by a research report highlighting AI-related risks, the group rebounded modestly on Tuesday as Anthropic said it had new tools it developed with some partner companies.

Two other industry groups within technology – semiconductors and equipment, and hardware – are up 7 per cent and over 4 per cent, respectively, in 2026.

The relative performance of semiconductor stocks compared with software has reached extreme levels.

Nvidia is also the biggest company among the “Magnificent Seven” group of megacap stocks, which include Alphabet (GOOGL.O), Apple (AAPL.O) and Tesla (TSLA.O).

Those stocks led the way for much of the latest bull market that began in October 2022, with investors flocking to them amid the companies’ outsized earnings growth and competitive advantages.

“Nvidia’s earnings matter because they are kind of the linchpin of the Mag Seven,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

But Magnificent Seven performance has been lackluster in 2026. Nvidia has been the best performer, rising over 3 per cent. Among other Mag 7 members, Amazon (AMZN.O) has slumped about 10 per cent and Microsoft (MSFT.O) has dropped nearly 20 per cent, making it the biggest single drag on the performance of the S&P 500 this year as of Friday, according to S&P Dow Jones Indices.

In addition to concerns about the software industry, Microsoft shares have been weighed down by worries that the company’s massive spending to build out AI-related infrastructure will fail to garner sufficient returns. Similar spending worries have weighed on Amazon, Alphabet and Meta Platforms (META.O)

Tech’s struggles have also come as investors have moved to other sectors of the market, which have been lagging for much of the bull market.

Since the tech sector peaked last year in late October, it has slumped about 10 per cent. In that time, materials (.SPLRCM) and energy (.SPNY) have both climbed over 20 per cent, while industrials (.SPLRCI) and consumer staples (.SPLRCS) are both up well over 10 per cent.

Supported by those groups, the benchmark S&P 500 stayed relatively unchanged since late October despite tech’s woes.

Even with tech’s tepid return so far this year, the group remains central to the performance of major benchmark indexes. For example, tech has a 33 per cent weighting in the S&P 500; financials (.SPSY) are the next biggest of the 11 index sectors, with a weighting of 12.4 per cent.

That means that even as the other sectors shine, the benchmark indexes will be hard-pressed to move significantly higher without the help of tech.