The Nasdaq Composite tumbled 4.2% on Friday — falling more than 1,100 points to close at 26,830.96 — in the worst single-day decline for the technology-heavy index the since the tariff-driven rout of April 2025. The selloff erased more than $1.2 trillion in value from the PHLX Semiconductor Index, according to Dow Jones Market Data cited by the Wall Street Journal.
The catalyst was twofold. The Labor Department reported that the U.S. added 172,000 seasonally adjusted jobs in May, blowing past the 80,000 that analysts polled by the Journal had forecast. The stronger-than-expected hiring number, alongside a broader underemployment rate of 8.1% per FRED’s vintage figure, reinforced expectations that the Federal Reserve may need to raise interest rates later this year to combat inflation. The yield on 2-year Treasury notes surged to 4.16%, its highest close in 16 months, as bond prices fell.
At the same time, fresh doubts about the profitability of enormous capital expenditures on artificial-intelligence infrastructure slammed chip stocks. Broadcom shares dropped 7.9% after the company issued relatively weak guidance in an earnings report on Wednesday, according to the Journal. Nvidia fell 6.2%. Micron Technology, Intel, Super Micro Computer and Sandisk each lost more than 11%. Cisco declined more than 6%. Equipment maker Caterpillar, lately an AI play because of its power and energy business, fell 3.8%.
The broader Russell 2000 index of smaller companies lost 3.5% on rising borrowing-cost fears. Stocks, bonds, oil, gold and bitcoin all fell in a broad risk-off day.
“I don’t think that the risks are fully appreciated,” Kristina Hooper, chief market strategist at Man Group, told the Journal. “There’s a lot that could go wrong.”
The selloff marks an abrupt reversal from a market that had been on pace for a fourth consecutive year of blockbuster gains, driven largely by a handful of AI-linked companies. The Journal reported that the S&P 500 posted gains of more than 11% through May — but only 2.4% excluding AI-related stocks, according to Hooper’s analysis. Some 43% of companies in the S&P 500 rose in May, down from 64% in January, while just 25% of stocks outperformed the benchmark index last month compared with 59% at the start of the year.
“As the year wore on, though, fewer stocks have kept pace with the index’s overall gains,” Krystal Hur reported for the Journal.
Many investors view the narrowing breadth as a warning signal. “When things go well, they go really well, but when things go badly, they can go really badly,” Tom Hancock, a portfolio manager at GMO, told the Journal. Eric Teal, chief investment officer at First Horizon Wealth Management, said his firm has increased exposure to financials, healthcare and consumer staples in recent months in part due to concerns about concentration in AI stocks.
Despite the selling, some analysts expect the broader trend of solid corporate earnings and a resilient economy to support a recovery once geopolitical uncertainty recedes. Angelo Kourkafas, senior global investment strategist at Edward Jones, told the Journal: “Once we move past the geopolitical shock, I think that’s going to be the catalyst enabling that broadening to resume.” The S&P 500 traded at 21 times expected earnings over the next 12 months, above its 10-year average of 19 times, according to FactSet.
The weekly rout also coincided with fresh capital-raising announcements from major tech companies. Alphabet, Google’s parent company, said this week it would sell $85 billion of equity to finance its AI build-out. SpaceX is aiming to raise roughly $75 billion in what would be the largest initial public offering ever, according to a Morgan Stanley analysis cited by the Journal. Elon Musk’s rocketry and AI company has a valuation of $1.77 trillion, and the offering is slated for June 12.