On December 12, 2025, U.S. stock markets experienced a noticeable downturn as investors shifted away from high-valued technology stocks, particularly those linked to the artificial intelligence (AI) sector. This shift came just one day after benchmarks like the S&P 500 and Dow Jones Industrial Average had reached all-time highs, driven by strength outside of major tech firms.
The S&P 500 fell approximately 1.3%, while the Nasdaq Composite dropped around 1.9%, with significant losses concentrated in AI-related stocks. The Dow also declined about 0.6%. Early trading had shown some resilience in the Dow, but as the day progressed, selling pressure increased across the market.
A key contributor to this market reversal was Broadcom, which, despite reporting a strong fiscal fourth-quarter performance with adjusted earnings of $1.95 per share and record revenue of $18.02 billion, saw its shares plummet more than 11%. Concerns centered on profitability after the company warned that rising sales of lower-margin custom AI processors could negatively impact profit margins. This revelation reignited fears about the sustainability of the AI boom, leading many investors to reconsider the high valuations assigned to these companies.
Oracle also weighed heavily on market sentiment. Following a significant drop in its stock earlier in the week, Oracle announced delays in completing data centers for OpenAI, pushing the timeline to 2028 from 2027. This setback comes amid labor and material shortages, raising alarms about Oracle’s ability to meet growing AI infrastructure demands. As a result, shares of other major players in the AI space, including Nvidia, AMD, Micron, and Arm, equally faced declines ranging from 3% to 6%.
The tech selloff was further exacerbated by rising bond yields. The 10-year Treasury yield climbed to 4.19%, adding pressure on high-growth stocks by increasing the discount rate applied to their future earnings. This shift highlighted the broader macroeconomic tensions as the Federal Reserve navigated a careful balance with inflation still elevated despite a recent rate cut.
Following the Federal Reserve’s decision to lower the target range for federal funds by 25 basis points to 3.50%-3.75%, dissent emerged among officials regarding the inflation outlook. Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid voiced concerns over the adequacy of current data implications after a government shutdown hampered economic reporting.
In contrast, Canada’s TSX index managed to climb to a fresh intraday peak, gaining 0.2% for the day. The TSX’s strength was largely attributed to gains in cannabis stocks, following speculation that loose federal restrictions on marijuana would be forthcoming. Additionally, the mining sector performed well, benefiting from surges in gold and silver prices.
Europe, however, was not insulated from the tech-focused fears as shares ended lower amid revived worries of an AI bubble triggered by developments on Wall Street.
Investors are now keenly observing upcoming economic reports on U.S. employment and inflation, which could potentially influence both Federal Reserve policies and bond yields. The evolving dynamic between AI growth and profitability also remains a focal point as companies grapple with the realities of scaling their operations in the face of rising costs and significant infrastructure demands.
In summary, December 12, 2025, underscored the fragility of the current market climate, particularly regarding technology stocks tied to AI. The rapid shift in investor sentiment serves as a reminder of the market’s sensitivity to signs of profitability amid an ongoing reevaluation of growth projections. Meanwhile, Canada’s TSX illustrates how different sectors can uniquely drive market performance in a time of broader volatility.
