Week:
S&P500: -0.3% FTSE100: +1.1% Gold: +3.7% Bitcoin: -2.9%
YTD: S&P500: +0.3% FTSE100: +9.6% Gold: +18.7% Bitcoin: -24.5%
AI Rebound Fades as Credit Risks and Geopolitics Return
Source: Connect Weekly | Week ending 28 February 2026
US equities finished February on a softer note as early-week optimism around AI and software rebounded briefly before fading under the weight of credit concerns, tariff uncertainty, and geopolitical escalation. The S&P 500 and Nasdaq 100 closed the week lower, while the Russell 2000 managed to hold onto monthly gains despite late-week weakness. Tech volatility remained elevated, and bitcoin headed for a fifth consecutive losing month.
What drove markets this week
Markets began the week under pressure after President Trump’s 15% global tariff announcement rattled risk appetite. Software and payments stocks bore the brunt of selling following a dystopian AI research note that warned of credit stress in a hyper-automated future. Financials slumped, crypto extended its slide, and defensive sectors outperformed.
Tuesday and Wednesday brought a rebound. AI infrastructure names recovered sharply as hyperscalers and semiconductor plays regained footing. Nvidia partnership announcements and renewed capex commentary steadied sentiment. Small caps extended their outperformance streak, and crypto staged a relief bounce. The rally broadened midweek as earnings beats across retail, biotech, and AI-adjacent industrial names supported risk-taking.
Nvidia beat, but doubts linger
Thursday’s session marked a turning point. Despite Nvidia delivering a strong earnings beat and robust sales outlook, the stock and broader chip complex dipped as investors questioned the sustainability of hyperscaler capex levels. Equal-weight indices held up better than the tech-heavy benchmarks, underscoring the ongoing rotation beneath the surface. Financials outperformed as traders reassessed credit risks, while high-beta AI infrastructure names traded unevenly.
Friday: Credit concerns weigh on tech and financials
Selling intensified into Friday as rising credit risks pressured upstart growth companies and private-credit-exposed names. Neoclouds, quantum computing firms, and data centre operators were hit particularly hard. The S&P 500 and Nasdaq 100 ended the week and month lower, while the Russell 2000 closed February modestly higher despite Friday’s decline. Healthcare provided relative stability as oil prices climbed amid renewed tension with Iran. Bitcoin continued to trend lower.
Weekend escalation: Middle East tensions rise
Over the weekend, the geopolitical backdrop darkened as US and Israeli strikes targeted Iran, with Tehran retaliating. Markets had partially anticipated escalation, limiting immediate dislocation, but energy markets remain the key transmission channel. The risk of disruption in the Strait of Hormuz, a critical chokepoint for global oil supply, has become the primary concern. Oil prices are expected to open higher, and energy sensitivity could dominate trading in the coming week.
Looking ahead
March begins with markets balancing AI enthusiasm against tightening credit conditions and geopolitical risk. Energy and defence may remain bid if tensions persist, while high-multiple tech continues to trade tactically around earnings momentum and capex visibility. With volatility elevated and liquidity thinner into month-end, investors are likely to remain selective as the macro and geopolitical picture evolves.
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