Wall Street experienced a sharp decline on Friday, largely influenced by Broadcom’s earnings report, which sparked worries about a potential AI bubble and lessened the optimism that arose from the Federal Reserve’s unexpected softer stance regarding interest rate cuts in 2026.
In the latest trading session, the Dow Jones Industrial Average dropped over 200 points, or 0.5%, settling at $48,462. The S&P 500 fell by 1.1%, while the Nasdaq lost 420 points, or 1.8%.
On Thursday, the blue-chip index had risen nearly 200 points to reach a record intraday high of 48,886.
Broadcom’s stock took a hit, decreasing more than 10%, even though its quarterly sales were projected to be strong. The company indicated that future profit margins on AI system sales would face reductions.
This has intensified worries about the profitability of the surging investments in AI.
Following a disappointing outlook from Oracle, other semiconductor shares like Advanced Micro Devices also fell by 1%, leading the broader chip index down by 1.5%.
Oracle’s stock fell by nearly 5% in the previous session after experiencing its largest single-day decline since January.
As David Morrison, a senior market analyst at Trade Nation, noted, “With ‘big tech’ driving the bull market since October 2022, there’s a risk it could lead to a wider selloff.”
Despite the grim outlook, the S&P 500, Dow, and Russell 2000 all achieved record highs on Thursday, buoyed by the Federal Reserve’s decision to lower borrowing costs and its less aggressive outlook than many had feared.
Meanwhile, concerns about inflation were raised by policymakers who opposed the Fed’s rate cut, criticizing that inflation remained too high to support lower borrowing costs, particularly given the absence of new official data on price trends.
Still, traders anticipate a total rate cut of 50 basis points by late 2026, exceeding the Fed’s projection from Wednesday.
Nvidia’s stock fell by 1.9% amid reports that the company might increase production of its H200 chips to fulfill strong demand from China.
On a more positive note, Lululemon Athletica surged by 12% after the apparel maker raised its full-year profit forecast and announced that CEO Calvin McDonald would be stepping down.
In a surprising turn, U.S.-listed cannabis stocks saw gains as reports surfaced that President Trump is considering easing cannabis regulations via a planning order, with shares of Canopy Growth increasing by 23% and Tilray Brands rising by 30%.
