U.S. tech stocks fell on Friday, led by semiconductor makers and memory groups, after a strong jobs report sparked speculation that the Federal Reserve would raise interest rates by the end of this year.
The S&P Index, a broad gauge of the U.S. market, ended 2.64% lower, puncturing a dramatic stock market rally led by companies exposed to the AI capital investment boom. The technology-heavy Nasdaq Composite Index closed almost 4.2% lower, its worst day since April 2025, just one week before the much-anticipated listing of Elon Musk’s SpaceX, the largest initial public offering in history.
Losses extended beyond the tech sector as the sell-off intensified on Friday, with consumer cyclical stocks and basic materials groups falling as strong U.S. jobs data led to renewed belief that the Fed would be forced to raise interest rates to cool the economy. Investors will now be watching the market open on Monday to see if this trend continues.
U.S. Treasuries sold off heavily following the jobs report, with the yield on the two-year note rising 0.12 percentage points to a 15-month high of 4.18%, ending slightly lower.
“With inflation rising and the labor market improving significantly, the Fed is unlikely to ease policy in 2026,” said Eugenio Aleman, chief economist at Raymond James.
Arun Say, senior multi-asset strategist at Pictet Asset Management, said that while many tech sectors are relatively insensitive to rising interest rates, “in the very short term, the biggest risk could be that the Fed turns hawkish, given how long the momentum is and how concentrated the trading is.”
“We’re sitting on a massive momentum rally,” he said, and rising interest rates “will be damaging” to that.
U.S. markets are bracing for a new wave of stock supply ahead of next week’s SpaceX IPO and possible listings of AI startups OpenAI and Anthropic, which could be valued at around $1 trillion.
Alphabet plans to raise up to $85 billion in equity to fund investments in AI infrastructure, the largest such raise ever, but this one will be even bigger. Meta is also considering plans to raise tens of billions of dollars in a stock offering to fund its AI ambitions.
If this week’s decline continues, there could be further nerves about whether the market will be able to absorb the additional supply. Meta’s share price fell by as much as 7% after the Financial Times reported the funding plan.
The chipmaker, the biggest winner of recent stock gains, fell sharply after Broadcom missed its most bullish revenue forecast in Wednesday’s after-market results. The company’s stock price fell about 8% on Friday and another 12.5% on Thursday.
The Philadelphia Semiconductor Index fell 9.6% on Friday, but is still up nearly 80% since the beginning of the year. Arm Holdings and Micron fell more than 12%, and SanDisk fell nearly 9%.
The drop in stock prices was felt around the world, with South Korean semiconductor giant SK Hynix dropping 10% on Friday. Samsung Electronics fell 6%.
Analysts said the decline reflects the increasingly high hurdles companies have to impress investors after two months of stunning tech stocks. The S&P has fallen nearly 1% since the beginning of the week, threatening to end the index’s nine-week winning streak.
“The stock price has gone up unbelievably,” said Jordan Rochester, a strategist at Mizuho. [was] Probably due to drawdown. ”
“The true end of the cycle is when revenue growth slows or simply fails to meet high expectations,” Rochester said, citing a Broadcom report. He said this “could be a one-off” and “we haven’t seen the full picture yet.”
The narrow rise has sparked caution from some investors, who say the market is increasingly reliant on the tech sector to drive profit growth.
“Everything is really focused on this theme,” said Nicholas Forrest, chief investment officer at Candium. “This is a problem. If the results of AI are questionable or disappointing, it becomes very difficult to remain positive about risk assets.”
“One of the big things that everyone misses is the state of the market,” said Christian Raute, head of market trading strategy at Citi, in discussions about mega-IPOs.
“If the real world hates stocks that week, [the IPOs] It will cause even more disruption,” Raute said – Copyright the Financial Times Limited 2026
