Nvidia Leads Tech Stock Plunge
Nvidia suffered its sharpest single-day decline since last spring, pulling major U.S. indices into the red with the S&P 500 closing down 0.89% to 6,847.22, the Nasdaq sliding 1.04% to 22,640.60, and the Dow Jones dropping 1.59% to 48,711.03. European markets also retreated while Japan's Nikkei 225 bucked the trend, rising 0.62% to 58,859.01. The tech selloff has prompted a historic scramble for new bond issuances as investors rush to lock in yields and seek safer assets.
The plunge in Nvidia's shares, despite a blockbuster earnings report, reflects a growing unease among investors about the sustainability of the AI boom. Concerns are mounting over a potential AI bubble, with the sector's high valuations prompting a broader market rotation out of tech. The selloff was also fueled by worries about Nvidia's heavy reliance on a small number of large customers for a significant portion of its revenue. This shift in sentiment has triggered a significant flow of capital into the perceived safety of corporate bonds. U.S. corporate bond issuance has surged in early 2026, with year-to-date figures reaching $362 billion, an 11% increase from the same period in 2025. This rush for debt is largely driven by companies financing expansions in AI infrastructure and funding merger and acquisition activities. Recent weeks have seen a flurry of major bond sales, with companies like Amgen issuing a $4 billion four-part deal, and PG&E and DTE Energy raising $2.2 billion and $1.6 billion, respectively. Investor demand for this high-quality debt is strong, with investment-grade corporate bond yields hovering around 4.73%. This demand has pushed the extra yield, or spread, over safer government bonds to near-historic lows. In stark contrast to the downturn in U.S. and European markets, Japan's Nikkei 225 index has been hitting record highs. This bullish performance is partly attributed to the decisive victory of the Liberal Democratic Party in the recent parliamentary elections, which has fostered expectations of political stability. The rally in Japanese stocks is also being fueled by what analysts are calling the "Takaichi trade." Investors are anticipating that Prime Minister Sanae Takaichi's administration will maintain a dovish monetary policy, with the Bank of Japan continuing its accommodative stance and holding off on significant interest rate hikes. This optimism has been bolstered by a significant influx of foreign capital into the Japanese stock market. In the week ending February 21, foreign investors poured 402 billion yen into Japanese stocks, marking a sustained period of strong buying. This has been coupled with strong performances in key sectors like real estate, banking, and technology, further propelling the Nikkei's ascent.
