US equity markets extended their losing streak to a third consecutive session on Thursday, February 5, as persistent selling pressure in software and technology shares weighed heavily on major indices, stifling any potential rebound attempts. The bearish sentiment was further fueled by recent private jobs data, which reignited concerns about a potential economic slowdown in the world's largest economy.
Major Indices Register Declines
Following a steep 1.77% decline in the previous trading session, the technology-focused Nasdaq Composite index slipped another 1%. The broader S&P 500 and the blue-chip Dow Jones Industrial Average also opened in negative territory, falling 1.4% and 0.37%, respectively, at the opening bell. This consistent downward movement highlights the sustained pressure on risk assets.
Technology Giants Face Investor Scrutiny
The sell-off was particularly pronounced in the technology sector. Google's parent company, Alphabet, saw its shares tumble approximately 8% to $307 per share despite reporting December quarter results that surpassed market expectations. The decline was primarily attributed to the company's announcement of a significant increase in artificial intelligence-related capital expenditure.
Alphabet revealed plans to boost its 2026 capital expenditure to a range between $175 billion and $185 billion—more than double its projected spending for 2025. This aggressive investment strategy, while aimed at securing future growth, appeared to unsettle investors concerned about near-term profitability and returns.
Chipmaker and Consumer Stocks Also Under Pressure
Chipmaking giant Qualcomm also faced substantial selling pressure, with its stock opening with a gap down of 11%. The decline followed the company's warning that an industry-wide shortage of memory components would adversely impact its second-quarter financial results.
Outside the pure technology sphere, shares of cosmetics leader Estee Lauder opened significantly lower at $104.75 per share, marking a 12.4% drop from the previous close. Although the company reported better-than-anticipated numbers for its fourth quarter, it cautioned investors that tariff-related challenges are expected to erode approximately $100 million in profits during 2026.
Broader Market Sentiment Turns Risk-Off
The negative sentiment extended well beyond traditional equities. Precious metals and cryptocurrencies, notably Bitcoin, also experienced sharp corrections, indicating a broader shift towards risk-averse behavior among investors.
Bitcoin Tumbles Below Key Level
Bitcoin prices tumbled nearly 5%, slipping from below the $70,000 mark to around $69,493 in early Thursday trading. This decline pushed the world's leading cryptocurrency to its lowest level since November 2024, representing a drop of more than 40% from its all-time high of approximately $125,000 reached in October of the previous year.
The cryptocurrency market faced additional headwinds after US Treasury Secretary Scott Bessent stated, during a House Financial Services Committee hearing on Wednesday, that he lacks the authority to compel banks to purchase digital assets like Bitcoin.
Expert Analysis on the Tech Sell-Off
Market experts point to stretched valuations as a core reason for the ongoing pressure on US technology stocks. Viram Shah, founder and CEO of Vested Finance, noted that valuations had raced far ahead of underlying fundamentals. He explained that any negative catalyst—such as softer future guidance, expectations of higher interest rates, or uncertainties surrounding the monetization of artificial intelligence—is now triggering sharp price corrections.
"The Nasdaq has retreated around 5% from its recent peaks, and several major technology companies have seen declines of 15–25%, even without a fundamental deterioration in their long-term business prospects," Shah observed. "This does not necessarily signal that the market has found its bottom, but it does suggest that certain segments within the tech sector are now trading closer to their fair value."
Investment Strategy in a Volatile Market
For long-term investors navigating this volatility, Shah advised a cautious and selective approach. He suggested that initiating staggered purchases in financially strong, cash-generating companies can be a prudent strategy, rather than attempting to pinpoint the exact market bottom. The focus, he emphasized, should remain on quality and fundamentals.
Investors are also keenly awaiting results from e-commerce behemoth Amazon, scheduled for release after the US market close. Market participants are expected to scrutinize Amazon's capital expenditure plans, particularly its investments in artificial intelligence, with a similarly critical eye.
The recent downturn has been led by software stocks, as growing fears of AI-driven industry disruption have prompted a sector rotation. Investors are moving capital out of highly valued technology names and into other market segments perceived to offer more attractive valuations relative to their growth prospects.
