The software and services index, home to several leading cloud and software companies, fell for a fifth straight session on Tuesday, down more than 12% over the period, its steepest stretch of losses since March 2020.
Losses were more measured on the second day, reflecting persistent concerns about how rapid advances in artificial intelligence (AI) could upend long-standing software business models.
CrowdStrike was down 0.4%, while Intuit and Adobe slipped 0.5% each in premarket trading.
Advanced Micro Devices slid 7.2%, after the company forecast a slight dip in quarterly revenue, rekindling doubts over how effectively it can take on Nvidia in the red-hot AI market.
“AMD reported into an ugly tape, with tech being sold and questions about AI spending driving a sentiment shift across the space,” said Jake Behan, head of capital markets at Direxion.
“The move was more about traders stepping back from an ostensibly crowded AI trade,” Behan said.
Some support came from Super Micro Computer, which jumped 12.4% after raising its annual revenue forecast on sustained demand for its AI-optimised servers as companies ramp up data-centre capacity.
At 5.29am, Dow E-minis were up 132 points, or 0.27%, S&P 500 E-minis were up 6.25 points, or 0.09%, and Nasdaq 100 E-minis were down 10.5 points, or 0.05%.
Alphabet rose 0.9% ahead of its results due after markets close, while Amazon edged up 0.4% before its report on Thursday.
Markets will scrutinise the results from the “Magnificent Seven” for evidence that massive capital-spending plans are yielding the kind of returns to justify their lofty valuations.
At the same time, the increasingly crowded AI trade has been pushing investors toward undervalued small caps and other overlooked corners of the market.
The small-cap Russell 2000 and the mid-cap S&P 400 ended up 0.3% and 0.2%, respectively, on Tuesday.
The Russell 2000 was on track for a weekly gain of more than 1%, versus a modest decline for the S&P 500.
Volatility remained high. Wall Street’s “fear gauge”, the CBOE index, was at 18.27 points, after touching its highest level in two weeks in the prior session.
Eli Lilly, due to report its results shortly, slipped 0.3%.
Meanwhile, US President Donald Trump signed a spending deal into law on Tuesday, ending a partial government shutdown that had snarled the release of key labour-market data this week.
With some of the most watched government gauges — nonfarm payrolls and JOLTS — running late, traders will squint harder on private data, starting with ADP’s national employment print for January due at 8.15am.
Corporate earnings yet again highlighted the push-and-pull between higher costs and a cautious consumer amid economic uncertainty.
Mondelez forecast a subdued year, warning that price increases are deterring cost-conscious shoppers amid macro uncertainty.
The Cadbury owner’s shares fell 4.1%.
Chipotle Mexican Grill slid 6.5% after the burrito chain said it expects to raise menu prices this year, while projecting margins to remain under pressure as diners pull back on eating out.