US technology stocks came under severe pressure on Friday, with semiconductor companies leading a broad decline as investors grew cautious about valuations driven by artificial intelligence and absorbed stronger-than-expected US jobs data. The sell-off was most pronounced in the chip sector, where the PHLX Semiconductor Index plunged 10.3%, marking its steepest single-day fall since March 2020. This followed losses a day earlier after Broadcom's quarterly earnings failed to meet elevated market expectations for its custom AI chip business.
Massive Market Value Erased
The two-day rout erased approximately 12% from the semiconductor benchmark and wiped out around $1.3 trillion in market value from US-listed chipmakers. Nvidia shed about 6%, resulting in a loss of more than $300 billion in market capitalization. Micron Technology dropped 13%, while Marvell Technology sank 17%. Advanced Micro Devices fell nearly 11%. Broadcom itself lost 7.9% on Friday, extending its decline over two sessions to almost 20%. The sharp retreat came just days after the semiconductor index reached a record high. Even after the latest losses, the gauge remains up 73% this year.
Trader Sentiment Shifts
Dennis Dick, a proprietary trader at Triple D Trading, told Reuters: "You've had a lot of people here that were just blindly buying the dip. Blindly buying the dip had been winning you money, but that ended today." The sell-off highlights growing unease about the sustainability of AI-fueled gains, as investors reassess lofty valuations amid macroeconomic headwinds.
Strong Jobs Data Rattles Investors
Technology stocks also dragged broader US markets lower. The Nasdaq Composite fell 1.4%, while the S&P 500 declined 0.7% and the Dow Jones Industrial Average slipped 81 points, or 0.2%. Investor sentiment was further affected by fresh labor market data showing continued strength in the US economy. According to the Labor Department, employers added 172,000 jobs in May, roughly twice the number economists had expected. The stronger hiring figures added to concerns that the Federal Reserve may have less room to lower interest rates this year, pushing bond yields higher and weighing on equities.
Analyst Perspective
Ohsung Kwon, Chief Equity Strategist at Wells Fargo, commented: "The semiconductor sector was way overbought. That's why we're seeing the sell-off. I don't think it's the end of the (semiconductor) bull market." Despite concerns that artificial intelligence could reduce hiring, employment has remained resilient this year following a weak 2025.
Geopolitical and Oil Price Uncertainty
Markets have also been grappling with uncertainty linked to the Iran war and its effect on the global economy. Elevated energy costs continue to pose challenges. Benchmark US crude traded at around $93 per barrel, while Brent crude hovered near $95 per barrel. Both remain significantly above the roughly $70 per barrel level seen before the conflict began in late February. Oil prices have stayed high as the Strait of Hormuz, a key route for global oil and natural gas shipments, remains effectively closed. The resulting disruption has heightened concerns over inflation and slower economic growth. Although US and Iranian negotiators reached a tentative agreement last week to extend a ceasefire, the arrangement has not yet been finalized. Developments in Lebanon have also clouded hopes for a permanent settlement.
Global Markets Feel the Heat
The weakness in technology shares spread across Asia, where several markets closed lower. South Korea's Kospi tumbled 5.5% to 8,160.59 as technology giants came under pressure. SK Hynix dropped 9.9% and Samsung Electronics fell 6.4%. Japan's Nikkei 225 lost 1.3% to close at 66,588.12, with chip-related shares among the biggest decliners. Tokyo Electron fell 6.6% despite data showing Japanese real wages rose for a fourth consecutive month. Hong Kong's Hang Seng Index fell 1.2%, while China's Shanghai Composite slipped 0.7%. Australia's S&P/ASX 200 dropped 0.7%, Taiwan's Taiex lost 1.3% and India's Sensex declined 0.3%. In contrast, European markets were trading in positive territory by midday. Britain's FTSE 100 rose 0.5%, Germany's DAX gained 0.2% and France's CAC 40 added 0.6%.
