The BareStory
U.S. stock markets saw a rotation out of technology stocks last week, with the S&P 500 and the tech-heavy Nasdaq finishing the week with losses of approximately 0.6% and 1.6%, respectively. The Dow Jones Industrial Average gained 1% as investors moved into other sectors. A market rally on Wednesday, following the Federal Reserve's third interest rate cut of the year, was reversed by a technology-led sell-off on Friday.
The downturn was sparked by a more than 11% plunge in Broadcom’s shares on Friday, its worst single-day drop since January. The decline occurred despite the company reporting quarterly revenue of $18.02 billion and adjusted earnings that surpassed analyst estimates, driven by a 74% increase in AI chip sales. Broadcom’s CEO said the company has a $73 billion backlog for AI orders. The drop was attributed by one source to misinterpreted management remarks, while an analyst cited "AI angst" after the stock's significant year-to-date gains. Broadcom's CFO also stated that short-term gross margins would be lower due to upfront costs.
Other technology companies also saw their shares fall. Oracle’s stock declined nearly 11% on Thursday after a sales miss and weak guidance, and fell another 4.5% on Friday. The Friday drop followed a report of project delays for OpenAI, though Oracle responded that all of its project milestones remained on track. Nvidia and Meta Platforms were also among the week's worst-performing stocks.
In other sector-related developments, President Donald Trump stated on social media that Nvidia would be allowed to ship its H200 chips to approved Chinese customers, with the U.S. government receiving a 25% cut of the sales. In contrast to the tech sector, industrial company GE Vernova’s stock reached a record high after its CEO provided positive financial guidance through fiscal 2028.
How it may affect me
As a U.S. reader:
• The value of retirement and investment accounts with heavy exposure to tech stocks may have seen a short-term decline due to the sector's market sell-off.
• Strong AI chip sales and a large order backlog reported by Broadcom could signal continued job stability and growth within the U.S. technology sector.
• A potential policy allowing specific chip sales to China could generate new government revenue, as a 25% cut of sales was mentioned in the article.
• Company warnings of lower margins and weak guidance could speculatively lead to slower development or rollout of new technology services for consumers in the future.
