The U.S. stock market experienced a significant downturn on Friday, marked by widespread panic selling, particularly in major technology stocks that played pivotal roles in the AI boom. The Nasdaq composite dropped 1.9%, falling to its 50-day moving average, primarily due to substantial losses from Nvidia and Palantir. Meanwhile, the S&P 500 fell 1.1% and the Russell 2000 declined by 1.3%, indicating a broad market selloff. In contrast, the Dow Jones Industrial Average managed a smaller decline of 0.7%, buoyed by gains in Chevron, Coca-Cola, and Sherwin-Williams, each of which saw increases between 1.5% and 2%.
The sell-off was driven in part by disappointing news regarding Nvidia, which saw its stock plunge over 4% after reports surfaced that the U.S. government would block the sale of a scaled-down version of its Blackwell AI chip to China. This news cast a shadow on the company’s growth prospects amid concerns about a potential slowdown in the AI sector. Palantir also took a hit, dropping more than 1% after crossing below its 50-day moving average, along with several other tech stocks such as Robinhood and SoFi, both of which fell more than 1%.
Economic indicators contributed to the negative sentiment. The University of Michigan’s consumer sentiment index fell to 50.3, significantly below expectations of 53.2, marking its lowest reading in months. Additionally, year-ahead inflation expectations ticked up to 4.7%, raising concerns about consumer fatigue and the Federal Reserve’s potential response to maintain high interest rates.
The Innovator IBD 50 ETF, which tracks prominent growth stocks, declined by 3%, following several AI-focused firms such as Sterling Infrastructure, Credo Technology, and Celestica, all of which saw losses between 4% and 7%.
Earnings reports also led to dramatic shifts in stock prices. Take-Two Interactive was the biggest loser on the Nasdaq 100, crashing nearly 9% despite doubling its quarterly profit to $1.46 per share. Investors reacted negatively to the news that the much-anticipated “Grand Theft Auto 6” wouldn’t be released until November 2026. Conversely, Expedia surged 17% to an all-time high following strong earnings and positive forecasts, while Akamai Technologies jumped 11% on solid results.
Among the Dow stocks, Amazon continued its decline with a nearly 1% drop, following a significant 2.9% fall on Thursday, amid concerns about slowing online retail growth and increasing competition. Microsoft’s stock price fell for the eighth consecutive session, while Salesforce dipped 0.6%, nearing its 52-week low. In contrast, stocks like Chevron, Coca-Cola, and Sherwin-Williams provided some support, reflecting the mixed nature of market performance.
In commodities, WTI crude oil hovered around $59.65 a barrel, while gold prices climbed to approximately $4,000 an ounce as investors sought safe-haven assets. The 10-year Treasury yield remained flat at 4.09%, following a significant drop the previous day. Analysts have expressed concerns over the heavy institutional selling across leading growth stocks, indicating potential red flags for the market.
With both the Nasdaq and S&P 500 breaking below their 21-day moving averages, traders are keeping a close eye on whether these indexes can maintain their positions above the crucial 50-day moving averages. If they fail to hold these levels, analysts warn of a deeper correction ahead.
The heightened volatility in the market sparkles fears that the previously unshakeable AI rally might be faltering just as it gains momentum. With the recent news around Nvidia, the decline in Palantir, and the broader selling in AI-related ETFs, there remains significant uncertainty about valuations that were heavily predicated on AI optimism.
As the market navigates this turbulent phase, investor confidence appears to be waning, with ongoing monitoring of inflation data and Federal Reserve communications critical for assessing potential market stabilization or further downturns.
