Nasdaq Outlook 2026: Why AI Infrastructure Stocks are Rising Despite a Tech Sell-Off

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Morning Market Snapshot – February 5, 2026

The atmosphere surrounding the opening bell this morning reflects a delicate tug-of-war between blockbuster AI infrastructure spending and a persistent “tech tantrum” that has gripped the Nasdaq for the past two sessions. Market participants are currently sifting through a deluge of conflicting signals. On one hand, Alphabet’s latest earnings report revealed a massive commitment to capital expenditures, with 2026 spending projected to reach $185 billion. This staggering figure has provided a much-needed tailwind for the semiconductor cohort, which had been reeling from recent software-led sell-offs.

However, the broader indices remain under pressure. While S&P 500 and Nasdaq futures show a modest rebound of approximately 0.14%, this follows a grueling 48-hour period where the tech-heavy Nasdaq shed 1.5% in a single day. Investors are increasingly concerned that the “Magnificent Seven” era of undisputed leadership is evolving into a more fragmented landscape. The rotation into defensive sectors like consumer staples and energy continues to gain momentum as traders seek shelter from the volatility of high-valuation AI plays.

The primary focus of the session ahead is whether the surge in chipmaker stocks can offset lingering “AI disruption” fears that have decimated the Software-as-a-Service (SaaS) sector. With Anthropic’s new productivity tools stoking anxiety about the obsolescence of traditional software workflows, the market is effectively split. Investors are rewarding the “picks and shovels” of the AI revolution while punishing the service providers. Furthermore, macroeconomic headwinds including the upcoming midterm election uncertainty and a strengthening U.S. Dollar Index (DXY) are keeping a lid on any aggressive bullish sentiment. Traders should keep a close watch on the $7,000 level for the S&P 500, as the index has struggled to maintain its footing after a volatile start to February.

Pre-Market News Catalysts

Broadcom (AVGO): Shares surged over 5.6% in pre-market trading. The move follows Alphabet’s announcement that it will nearly double its capital expenditures to $185 billion in 2026. As a primary partner for Google’s custom Tensor Processing Units (TPUs), Broadcom is positioned as a direct beneficiary of this massive infrastructure build-out.
Qualcomm (QCOM): The stock faced significant pressure, dropping nearly 10% before the bell. Despite beating earnings expectations, CEO Cristiano Amon issued a stern warning regarding industry-wide constraints in memory availability and pricing, which could stifle growth in the coming quarters.
Eli Lilly (LLY): The pharmaceutical giant continues its ascent, gaining additional ground after jumping 10% in the previous session. Strong guidance for 2026 and robust sales of its anti-diabetic and weight-loss drugs have propelled the company back above the $1 trillion market cap threshold.
Texas Instruments (TXN): Shares are in focus following the announcement of a $7.5 billion all-cash acquisition of Silicon Laboratories (SLAB). While SLAB shares skyrocketed nearly 50% on the news, TXN shares edged slightly lower as investors digested the premium paid for the semiconductor firm.

The Day’s Debate (The Bull vs. Bear Case)

The Bull Case: Optimistic strategists argue that the recent pullback is a healthy consolidation within a long-term structural bull market driven by the AI revolution. The primary catalyst for the bulls is the unprecedented scale of corporate investment. Experts from Melius Research highlight the “Google cohort” as a primary engine for growth, noting that Alphabet’s projected $185 billion spend signifies an “incredible” commitment to future technology.

This massive capital injection provides a high floor for the semiconductor and hardware sectors. Additionally, the bullish narrative highlights the Dow Jones Industrial Average’s resilience, which recently set new all-time highs. This suggests that while tech may be volatile, the broader economy remains on a solid footing. Bullish analysts also cite Texas Instruments’ recent acquisition of Silicon Laboratories as evidence that corporate confidence remains high and that M&A activity will continue to provide liquidity and support valuations.

The Bear Case: The pessimistic view centers on a “collision of headwinds” that could trigger a significant market correction. Bearish analysts at The Motley Fool cite historical data showing that midterm election years often experience intra-year drawdowns of up to 19% due to political and regulatory uncertainty. Furthermore, the “AI disruption” narrative has shifted from a promise of growth to a threat of displacement.

The recent slump in SaaS stocks, down nearly 13% over six sessions, suggests that investors are beginning to realize that some software companies could be entirely replaced by advanced AI tools like Anthropic’s Claude. Bears also highlight the “industry constraints” cited by Qualcomm, arguing that rising memory prices and supply chain bottlenecks will eventually eat into the profit margins of even the strongest tech players. With the U.S. Dollar at two-week highs and Bitcoin struggling to hold $70,000, the bear case is that a broader move away from “risk-on” assets is already underway.

The Strategic Takeaway

The single most important factor for traders to monitor this morning is the sustainability of the semiconductor rally amid a weakening software sector. This “internal divergence” within the tech industry suggests that broad-based index buying may no longer be an effective strategy. Instead, the market is demanding high selectivity. While Alphabet’s spending plans provide a lifeline for hardware, Qualcomm’s cautious outlook on memory pricing underscores that the path to AI dominance is fraught with logistical and financial hurdles. As the opening bell approaches, the focus should remain on whether the Dow’s defensive strength can continue to act as a buffer for the Nasdaq’s volatility.

Upcoming Session Outlook with Directional Bias

The market is expected to open with a Neutral/Sideways bias. While Alphabet’s massive spending guidance has sparked a relief rally in semiconductor stocks, broader concerns about SaaS disruption and hardware supply constraints are likely to prevent a full-scale recovery. Expect a choppy session as the market attempts to find a stable equilibrium between AI-driven optimism and macroeconomic caution.

Disclaimer: This article is for informational purposes only and does not constitute financial, investment, or legal advice. The information provided is a synthesis of publicly available data and expert analysis and should not be considered a recommendation to buy or sell any security. Investing in the stock market involves risk, including the possible loss of principal. Past performance is not indicative of future results. Readers should consult with a qualified financial advisor to determine an investment strategy that is suitable for their own personal financial situation and risk tolerance.