U.S. stocks experienced a steep sell-off on Friday, with technology shares bearing the brunt of renewed concerns over AI spending, margins, and valuations. The Nasdaq Composite led the decline, falling nearly 2% as investors rotated aggressively out of megacap tech and high-multiple growth names.
The S&P 500 slid more than 1%, pulling back a day after pushing to fresh highs, while the Dow Jones Industrial Average — less exposed to technology — held up better but still traded lower. Rising Treasury yields added pressure to risk assets, with the 10-year yield climbing above 4.18% as markets reassessed the pace and durability of post-Fed rate cuts.
Market Movers:
- Broadcom (AVGO) -8%: Shares sank despite strong quarterly results and upbeat guidance, as investors focused on management’s warning that AI-related revenue growth will pressure near-term margins. Concerns that AI hardware economics could begin to resemble lower-margin, commodity-style semiconductor markets overshadowed solid revenue growth and a dividend hike.
- Oracle (ORCL) -5%: Oracle continued its slide following earnings that revived fears about runaway AI infrastructure costs and delayed data center timelines. Reports that some OpenAI-linked projects could be pushed into 2028 intensified worries about the timing and payoff of massive AI investments.
- Lululemon Athletica (LULU) +12%: Lululemon surged after delivering a strong quarter, raising its full-year outlook, and expanding its share buyback program by $1 billion. The company also announced a CEO transition plan, which investors welcomed as part of a broader effort to reinvigorate growth.
- Rivian Automotive (RIVN) +16%: Shares jumped after analysts reassessed Rivian’s long-term potential following its AI & Autonomy Day. The company unveiled an in-house autonomy chip, a new AI driving model, and a subscription-based hands-free driving platform, boosting confidence in its software-led strategy.
- Tilray (TLRY) +27%: Cannabis stocks rallied after reports suggested the Trump administration is considering reclassifying marijuana to a less restrictive federal drug schedule. The move would lower regulatory risk for the industry and could open the door to broader medical and commercial adoption.
AI Valuations Under the Microscope
Friday’s selloff marked a sharp escalation in a broader reassessment of AI-linked stocks. While demand for AI infrastructure remains strong, investors are increasingly questioning whether spending levels are sustainable — and whether margins will hold as competition intensifies. Broadcom’s results emphasized those concerns, as management acknowledged near-term margin pressure tied to its AI revenue mix. Oracle’s struggles reinforced fears that the capital intensity of AI could weigh on earnings longer than expected, particularly if data center timelines slip or customer demand moderates.
Rotation Gains Momentum
As tech sold off, investors showed interest in cyclical and value-oriented names, aided by the Federal Reserve’s third rate cut of the year. Lower borrowing costs have boosted optimism around economic growth in 2026, supporting sectors more closely tied to consumer activity and industrial demand. Meanwhile, gold prices surged to fresh record highs, reflecting both falling real rates and lingering uncertainty about inflation, geopolitics, and the durability of the tech-led rally.
Looking Ahead
Markets head into the final stretch of the year with momentum clearly shifting. Next week’s data on inflation and consumer activity will be closely watched for clues on whether the Fed can continue easing in 2026 — and how much economic cooling lies ahead. For investors, the message from Friday was clear: AI remains a powerful long-term theme, but near-term patience is wearing thin. With earnings season mostly behind us, stock performance into year-end may hinge less on growth narratives and more on execution, margins, and realism around the cost of innovation.
