Technology stocks declined broadly on Tuesday as markets reacted to President Trump's renewed threats of trade actions against European nations. The tech-heavy Nasdaq Composite index dropped 1.7%, leading major market indexes lower at the start of a holiday-shortened trading week.
Shares of artificial intelligence chipmaker Nvidia fell more than 3%. Broadcom also dropped more than 3%. Tesla and Amazon shares sank nearly 3%. Meta, Alphabet, and Apple shares dipped almost 2%.
Oracle, an AI cloud provider carrying debt levels close to junk-bond status, saw its shares decline around 4%. Nvidia-backed emerging AI cloud firms Nebius and CoreWeave shed over 6% and 4% respectively.
The market movement followed President Trump doubling down on his threat to occupy Greenland and add new tariffs on European countries. These actions increased concerns about the future of the United States' 80-year diplomatic alliance with Europe, ahead of a meeting of world leaders at the World Economic Forum in Davos.
Analysts speaking to Yahoo Finance noted that Tuesday's tech selloff followed the typical pattern of investors moving away from riskier investments during market declines. They also pointed to continued investor unease about a potential artificial intelligence bubble.
Despite a positive outlook on the AI market from chip manufacturer TSMC that helped boost technology stocks last week, the group of stocks known as the Magnificent Seven has underperformed major indexes so far in 2026. According to Bloomberg data, these large technology stocks have collectively dropped more than 3% in January. During the same period, the Nasdaq Composite is just below the flatline and the S&P 500 is fractionally positive.
Hedgeye Risk Management analyst Sam Rahman commented on what he called the "massive underperformance" of large cap technology stocks in recent weeks. "There's been so much spending on AI-related capex ... investors are clearly concerned about what returns they're gonna get from all the spending," Rahman said.
Wedbush analyst Dan Ives viewed Tuesday's market pullback differently, describing it as a buying opportunity in a note to clients. "The back and forth war of words between Trump and the EU will give investors another opportunity to own the tech winners and despite the bears always trying to yell fire in a crowded theater......the AI Revolution is still in the early days of playing out," Ives wrote.
More information about how industry leaders are generating revenue from their artificial intelligence investments will emerge as technology companies begin reporting earnings in the coming weeks. Intel is scheduled to report this week, while Tesla, Meta, and Microsoft from the Magnificent Seven group will start releasing reports on January 28.