Tech Rout Hits Nasdaq Ahead of Data Wave
Key Points
- US stocks slid Friday as tech and AI-linked names led a broad selloff
- Broadcom’s post-earnings plunge intensified concerns over AI valuations
- Rising Treasury yields and mixed Fed signals added pressure to equities
- Investors now turn to key jobs, inflation and earnings data in coming week
Tech-led selloff knocks indexes from record highs
US stocks ended sharply lower on Friday, capping a difficult week for technology shares and artificial-intelligence beneficiaries. The S&P 500 fell about 1.0%–1.1%, retreating from a record reached the prior day, while the Nasdaq Composite dropped around 1.6%–1.8%, the worst among major benchmarks. The Dow Jones Industrial Average, which has less tech exposure, slipped roughly 0.4%–0.5% after touching an all-time high earlier in the week. The Russell 2000 small-cap index lost about 1.5% on the day but remained up roughly 1.2% for the week. For the week overall, the S&P 500 declined about 0.5%–0.6% and the Nasdaq fell around 1.6%–1.9%, while the Dow gained about 1.0%–1.2%.
Broadcom and chip stocks drag AI trade lower
The downturn was led by a sharp pullback in semiconductor and other AI-exposed stocks after Broadcom’s latest results and outlook disappointed investors. Broadcom shares plunged more than 11%, with the company’s sales outlook falling short of lofty expectations and failing to provide clarity on an AI revenue payoff or a forecast for 2026. That warning on margins and AI visibility followed earlier, weaker reactions to Oracle’s outlook, reinforcing concerns about whether heavy AI infrastructure spending will translate into the profits many investors had anticipated. The pressure spread across the chip sector: Micron fell about 6%–6.7%, AMD dropped roughly 4.8%, and Marvell and Lam Research lost more than 5%. Other major names including Nvidia, Intel, ASML, KLA, Applied Materials, GlobalFoundries and ARM also declined, with no notable gainers on semiconductor boards tracked during the session.
Rotation out of Big Tech and into cyclicals and value
Friday’s moves extended a broader rotation away from large technology and AI leaders into more cyclical and defensive areas. Sector data showed technology as the clear underperformer, down about 3% on the day, while energy was the next weakest but fell less than 1%. In contrast, consumer staples, consumer discretionary, healthcare, financials and materials finished in positive territory. Market commentary highlighted a shift from tech to value names as investors reassessed elevated valuations in AI-linked stocks. Regional banks, defense and aerospace shares, gambling-related names, retail, small caps and value-focused ETFs posted gains over the week, even as chip-focused funds such as leveraged semiconductor ETFs recorded some of the steepest declines.
Fed rate cuts, rising yields and mixed policy signals
The selloff came despite the Federal Reserve having delivered its third interest-rate cut of the year, a move that has supported broader risk appetite and helped push gold prices to a fresh record. However, Treasury yields moved higher on Friday, adding pressure to equities. The 10-year US Treasury yield climbed to around 4.18%–4.19%, while the 30-year yield rose above 4.85%. Several Fed officials signaled a preference for maintaining a somewhat restrictive stance. Chicago Fed President Austan Goolsbee, who opposed the latest rate cut, said it would have been more prudent to wait for additional data given that inflation has been above target for years and progress has recently stalled. Kansas City Fed President Jeff Schmid and Cleveland Fed President Beth Hammack also indicated they favor keeping policy modestly restrictive due to still-elevated inflation and ongoing economic momentum. By contrast, Philadelphia Fed President Anna Paulson expressed greater concern about labor market weakness than about upside inflation risks. Futures markets were pricing in roughly a 24% chance of another 25-basis-point cut at the late-January FOMC meeting.
Looking ahead: data-heavy week and key earnings
Attention now shifts to a dense calendar of economic releases and corporate earnings in the final full trading week of the year. The delayed November nonfarm payrolls report is due Tuesday before the market open, with consensus expectations for 50,000 jobs added and an unemployment rate of 4.5%. The November Consumer Price Index is scheduled for Thursday, with overall inflation projected to rise 3.1% from a year earlier. Additional data include Monday’s homebuilder sentiment survey, Friday’s existing home sales, Tuesday’s October retail sales, and the final December consumer sentiment reading on Friday. On the earnings front, Micron will report after Wednesday’s close, offering another read on the chip sector following the recent selloff. Thursday evening brings results from FedEx, Darden Restaurants, KB Home and Nike. Investors will watch FedEx for signals on e-commerce and global shipping demand, and Nike for progress on its turnaround efforts in its fiscal second quarter.
Notable single-stock moves amid the volatility
Beyond semiconductors, several individual stocks saw outsized moves. Lululemon shares jumped about 9%–9.6% after the company reported stronger-than-expected quarterly earnings, raised its longer-term earnings forecast and announced that CEO Calvin McDonald will step down at the end of January following a period of weaker sales. In contrast, Roblox fell more than 6% after JPMorgan downgraded the stock from overweight to neutral, citing limited upside and headwinds related to user engagement and bookings. Cryptocurrency-related stocks also declined as Bitcoin dropped more than 3%, while some industrial and large-cap names such as General Electric and Linde advanced earlier in the day on positive analyst coverage. Overall, the day’s trading underscored a divergence between pressured tech leaders and more resilient cyclical and defensive segments.
Key Takeaways
- A concentrated selloff in AI and semiconductor leaders was enough to erase recent S&P 500 and Nasdaq gains, even as the Dow stayed relatively resilient.
- Broadcom’s guidance and Oracle’s earlier outlook acted as catalysts for investors to reassess rich AI valuations and trim exposure to the sector.
- Rising long-term yields and mixed Fed messaging kept rate expectations in flux, reinforcing the market’s focus on upcoming jobs and inflation data.
- Sector and ETF performance showed a clear rotation toward cyclicals, financials and value, suggesting investors are broadening exposure beyond mega-cap tech.
- The coming week’s macro data and earnings from Micron, FedEx and Nike are positioned to shape sentiment on both the economic outlook and the durability of the tech pullback.
References
- 1. https://tradingeconomics.com/united-states/stock-market
- 2. https://www.cnbc.com/2025/12/12/cramers-week-ahead-new-economic-data-earnings-fedex-jabil.html
- 3. https://seekingalpha.com/news/4530985-nasdaq-composite-sp500-dow-jones-stock-market
- 4. https://news.futunn.com/en/post/66152189/us-equity-etf-tracker-tech-stocks-drag-nasdaq-lower-triple
Get premium market insights delivered directly to your inbox.