S&P 500, Dow beat Nasdaq for first time since 2022 as tech sell-off deepens

For most of the past three years, the Nasdaq Composite has dominated the markets, posting returns of 44.6% in 2023, 29.6% in 2024, and 21.1% in 2025, while the S&P 500 and Dow lagged behind. This tech-driven outperformance began on November 30, 2022, when OpenAI introduced ChatGPT, launching an artificial intelligence rally that particularly benefited semiconductor companies and other tech stocks. The Nasdaq's structure—heavily weighted toward tech and tech-focused companies—made it the primary beneficiary of this AI boom, while the S&P 500 and Dow, with larger exposure to value-focused and cyclical sectors like industrials, healthcare, and consumer staples, trailed throughout the period.

In 2026, however, the picture has inverted. As of market close on July 27, the Nasdaq's year-to-date total return stands at 7.8%, underperforming the S&P 500's 9% and the Dow's 9.1%—the first time since 2022 that the Nasdaq has fallen behind both indexes. A sell-off in tech stocks, particularly hyperscalers, has driven this reversal. The catalyst is investor skepticism about the return on investment of massive AI infrastructure spending. Alphabet's recent earnings report encapsulated this sentiment shift. The company reported record revenue, a significant jump in earnings, and 34% operating margins—results described as "nothing short of spectacular." Yet the stock sold off sharply because of spending concerns. Capital expenditures surged to $45.9 billion（約7.3兆円）, driven by AI, causing Alphabet to report its first negative free cash flow quarter in over a decade. The company is raising its full-year capex guidance and calling for even higher spending in 2027, signaling no intention to slow investment. This reversal is striking: Alphabet has transformed from a "high-margin money-printing machine" to a company seeing more cash leave the business than enter it.

The pullback extends beyond Alphabet to other hyperscalers like Amazon and Microsoft, as well as to semiconductor stocks broadly. Apple, meanwhile, presents a contrasting case. Once criticized by investors for slow growth and lack of AI investments, Apple is now at an all-time high because it takes what investors see as a disciplined approach: it owns the devices that AI tools run on and partners with leading AI models rather than building its own, avoiding the capital intensity that burdens hyperscalers. Apple trades at 38.5 times forward earnings, compared to just 16.5 for Alphabet, reflecting investor preference for Apple's regimented AI spending approach over Alphabet's aggressive capital deployment.

The broader implication is that market leadership has shifted from growth stocks (where AI spending was celebrated) to value-focused sectors. Investors who believe AI spending will ultimately pay off have an opportunity to purchase quality companies at discounts, but the market's current skepticism warrants caution: not every AI stock selloff represents a bargain, as many high-flying AI stocks remain priced for perfection.

For three consecutive years (2023, 2024, 2025), the Nasdaq dominated the market, driven almost entirely by the AI boom that followed OpenAI's introduction of ChatGPT on November 30, 2022. That single product launch triggered an artificial intelligence–driven rally in tech stocks, especially semiconductor companies, which benefited the Nasdaq disproportionately because the index is far more heavily weighted in tech and tech-focused companies than the S&P 500 or Dow. The Nasdaq recovered dramatically from its 2022 collapse (when it fell 32.5% due to inflationary pressures and post-pandemic valuation concerns) and posted returns of 44.6% in 2023, 29.6% in 2024, and 21.1% in 2025.

Now, in 2026, market sentiment has shifted sharply. Alphabet's recent earnings report exemplifies the new narrative: despite record revenue and 34% operating margins, the stock sold off because capital expenditures surged to $45.9 billion（約7.3兆円）, driven by AI infrastructure investments, causing Alphabet to report its first negative free cash flow quarter in over a decade. This single data point has catalyzed broader skepticism about whether hyperscalers' massive AI spending will generate adequate returns. The sell-offs in Alphabet, Amazon, and Microsoft, along with a pullback in semiconductor stocks, signal that some investors now view AI spending ramp-ups—which Wall Street celebrated just a couple of years ago—with doubt. Apple's divergence is telling: once penalized for lacking AI investments, it is now at an all-time high because it owns the devices AI tools run on and partners with leading AI models rather than building them internally, avoiding the cash burn that plagues the hyperscalers.

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