An unexpected wave of selling swept through the stock market on Friday, marking a stark contrast to the record highs celebrated earlier in the week. Notably, the technology sector, particularly semiconductor stocks, faced significant declines during the session. This downturn was catalyzed by an unexpectedly strong jobs report that raised concerns about a potential Federal Reserve interest rate cut, leading to a surge in the 10-year bond yield which crossed the 4.5% threshold.
The S&P 500 and Nasdaq Composite plummeted by 2.6% and 4.2% respectively on Friday, erasing the gains that had been achieved just days prior. The S&P 500’s losses also ended a nine-week winning streak. While there were sectors like health care and financials that managed to benefit from the rotation out of technology, some stocks, including Eli Lilly and Wells Fargo, posted modest gains of 2.4% and 5.7% for the week.
Tech stocks had been under pressure since Broadcom’s disappointing earnings report earlier in the week, which sparked concerns across the sector. The troubles began with Palo Alto Networks, whose shares dropped 5.6% after it fell short of expectations despite reporting strong quarterly results. Investors were unsettled when management maintained its long-term outlook instead of raising it, contributing to a 3.4% drop for the stock.
CrowdStrike also followed a similar trajectory, reporting better-than-expected earnings, only to see its shares tumble by more than 10% before closing down nearly 4%. Despite these setbacks, CrowdStrike’s performance highlighted the positive impact of AI on its business, as confirmed by CEO George Kurtz.
However, the most significant blow came from Broadcom, which saw a staggering 12.6% drop in its stock price after an earnings report that not only failed to meet high expectations but also revealed lower-than-anticipated revenue figures. Although the company projected strong AI semiconductor growth for fiscal 2028, the news was insufficient to maintain investor confidence, leading to Broadcom finishing the week down 13.7%. Intel, another chip manufacturer, also faced challenges and saw its shares decline by 13.5%.
Amidst the general downturn, Nvidia emerged as a relatively stable player, with only a minor 2.9% dip over the week. The company announced ambitious plans to venture into the personal computer market during the influential Computex conference, which buoyed shares of Arm Holdings by 15.7% despite Arm experiencing a 3% decline overall for the week.
Despite prevailing market challenges, Marvell Technology experienced remarkable gains, soaring over 28% following optimistic forecasts about becoming a “next trillion-dollar company” as stated by Nvidia’s CEO, Jensen Huang. Such rapid price movements, however, raised concerns about their sustainability.
The week concluded with heightened anticipation around significant upcoming IPOs that could flood the market with new shares. Notably, SpaceX is set to begin trading soon, planning to raise around $75 billion at a valuation of $1.8 trillion. Meanwhile, Anthropic, a notable AI-focused startup, filed for an IPO that could represent one of the largest share sales to date.
Additional concerns were raised regarding other tech giants, with Alphabet’s recent announcement of an $85 billion stock sale for funding AI initiatives leading to nearly a 4% drop in shares. Likewise, reports that Meta Platforms might pursue a similar capital raise sparked a 6% decline.
The sheer volume of stock hitting the market has led experts to caution investors about the potential impact of increased supply on stock prices. Historical trends indicate that an oversupply can create downward pressure on share prices, prompting questions about the sustainability of the current market rally. As the week wraps up, investors are left pondering whether the market can absorb the influx of new capital without significant disruption.
