Stocks on Wall Street plunged on Friday as Broadcom’s latest results added to concerns about an AI-fueled bubble, dampening optimism stoked by the Federal Reserve’s less-hawkish-than-expected signals on 2026 rate cuts.
In recent trading, the Dow Jones Industrial Average tumbled more than 200 points, or 0.5%, to 48,462. The S&P 500 dropped 1.1%, and the Nasdaq lost 420 points, or 1.8%.
The blue-chip index had risen nearly 200 points to 48,886, a new all-time intraday record.
Broadcom slid more than 10% after the chipmaker warned of slimmer future margins on its AI system sales, despite projecting strong quarterly revenue.
This sharpened worries about the profitability of surging AI investments.
Other chip stocks, such as Advanced Micro Devices lost 1% and a broader chips index fell 1.5% a day after Oracle unveiled a weak forecast.
Shares of the cloud company fell nearly 5% after logging their biggest daily drop since January in the previous session.
“Given the fact that ‘Big Tech’ has been at the vanguard of the rally since October 2022, there’s a danger that it may become the catalyst for broad-based selling,” said David Morrison, senior market analyst at Trade Nation.
Despite the gloomy outlook, the S&P 500, the Dow and the Russell 2000 all closed at record highs on Thursday and were on track for weekly gains after the Fed trimmed borrowing costs and delivered a less hawkish outlook than investors had feared.
“There’s plenty of cash on the sidelines, the consumer is not as dire as many proclaimed, and the Fed is easing, not tightening. Plus, many sectors and stocks are well rested and ready to run,” said Robert Edwards, chief investment officer, Edwards Asset Management.
Meanwhile, policymakers who voted against the Fed’s interest rate cut this week said they are worried that inflation remains too high to warrant lower borrowing costs, particularly given the lack of recent official data about the pace of price increases.
Still, traders are pricing in a total of 50 basis points of rate cuts by the end of 2026 – more than the Fed signaled on Wednesday.
Among others, Nvidia slipped 1.9% after a report said the company is evaluating an increase in H200 chip production to meet robust demand from China.
Lululemon Athletica jumped 12% after the apparel maker raised its annual profit forecast and said that CEO Calvin McDonald was leaving the company.
In other single-stock moves, US-listed shares of cannabis companies rose after a report said President Trump was looking to cut restrictions on marijuana through a planned order. Canopy Growth added 23%, and Tilray Brands climbed 30%.
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