Big fall in US tech shares as AI stocks are hit – The Irish Times
US tech stocks experienced a significant sell-off on Friday, led by chipmakers and memory groups. This downturn followed a strong jobs report that has led investors to bet that the Federal Reserve will raise interest rates by the end of this year.
The S&P index, a broad measure of the US market, closed 2.64 per cent lower, interrupting a rally driven by companies involved in the AI capital expenditure boom. The Nasdaq Composite fell nearly 4.2 per cent, marking its worst day since April 2025.
Interest Rates and Market Volatility
The sell-off extended beyond technology to include basic materials and consumer cyclicals. This shift occurred as a “hot” US jobs report suggested the Fed may be forced to raise rates to cool the economy.
US government bonds also reacted sharply, with the two-year yield reaching a 15-month high of 4.18 per cent. Eugenio Alemán, chief economist at Raymond James, noted that with improving labour markets and rising inflation, the Fed is unlikely to ease policy in 2026.
The AI Concentration Risk
Chipmakers, previously the primary winners of the recent rally, saw sharp declines. Broadcom shares fell approximately 8 per cent on Friday, following a 12.5 per cent drop on Thursday, after the company failed to meet the most bullish revenue forecasts.
The Philadelphia Semiconductor index dropped 9.6 per cent on Friday, though it remains nearly 80 per cent higher this year. Other significant losses included Arm Holdings and Micron, both down more than 12 per cent, and Sandisk, which fell almost 9 per cent.
Global markets felt the impact, with South Korea’s SK Hynix falling 10 per cent and Samsung Electronics dropping 6 per cent. Analysts suggest these losses reflect a higher bar for companies to impress investors after a two-month tech rally.
Upcoming Equity Supply and IPOs
The market is preparing for a massive influx of new equity. In addition to the SpaceX listing, AI start-ups OpenAI and Anthropic may seek listings with valuations potentially reaching $1 trillion each.
Major tech giants are also seeking funds. Alphabet plans to raise up to $85 billion in equity for AI infrastructure—the largest such raising on record—while Meta is considering raising tens of billions of dollars. Meta’s shares fell as much as 7 per cent following reports of its planned fundraising.
Future Outlook and Scenarios
Investors will monitor Monday’s market opening to see if the downward trend persists. If the sell-off continues, nerves regarding the market’s ability to absorb new equity supply could intensify.
According to Christian Raute of Citi, the success of mega-IPOs may depend heavily on the broader market context. If investors dislike equities during the week of these listings, it could potentially create greater disruption.
Jordan Rochester of Mizuho suggests the current dip could be a one-off drawdown. However, he notes that the cycle may truly end if earnings growth fails to meet elevated expectations.
Frequently Asked Questions
Why did US tech stocks fall on Friday?
The sell-off was triggered by a strong jobs report, which led to expectations that the Federal Reserve will raise interest rates to cool the economy.
Which companies were most affected by the decline?
Chipmakers were hit hardest, with Broadcom, Arm Holdings, and Micron seeing significant drops, while Meta’s shares fell up to 7 per cent amid fundraising news.
What upcoming events could further impact the market?
The market is bracing for the SpaceX IPO, potential listings for OpenAI and Anthropic, and large-scale equity raises from Alphabet and Meta.
Do you believe the current market correction is a temporary drawdown or a sign of a larger shift in AI valuations?