Wall Street traders took profits on the year’s biggest artificial intelligence winners, dragging global gauges back from the brink of record highs. Longer-dated bond yields climbed.
A disappointing sales outlook from Broadcom Inc. sent the chipmaker tumbling 11% and weighed on rivals, further fueling investor anxiety over AI wagers initially prompted by Oracle Corp. The AI bellwether’s stock drop started Thursday following a forecast for rising capital outlays and a longer timeline to a revenue payoff. The slump deepened Friday on a report of delays to some of Oracle’s data center projects. Shares of companies tied to the AI power infrastructure also slid.
The Nasdaq 100 slid 1.9% while The S&P 500 fell 1.1% after the index had notched a record close in the previous session. The Dow Jones Industrial Average and Russell 2000 pulled back from all-time highs.
Friday’s profit-taking after stock benchmarks hit new peaks was not unexpected, according to Louis Navellier, chief investment officer at Navellier & Associates.
“The AI bubble is deflating but not popping,” Navellier said. “Heightened concerns on OpenAI agreements may make further gains challenging.”
The selloff put a damper on the ebullience sparked by the Federal Reserve’s third-straight interest rate cut this week. Investors also had to contend with mixed messages from Fed officials after they left their outlook for a single cut in 2026 intact.
Yields on Treasury 30-year bonds rose 6 basis points to a three-month high after Cleveland Fed President Beth Hammack said she would prefer interest rates to be slightly more restrictive to keep putting pressure on inflation, which is still running too high.
Jeff Schmid of the Kansas City Fed also pointed to consumer pricing pressures. Schmid said he was against the central bank’s decision this week to lower interest rates because inflation remains too high and the economy continues to show momentum.
“Judging from the calendar, this could be a day Wall Street takes a breather from its recent feverish pace,” said Joe Mazzola, head trading and derivatives strategist at Charles Schwab. “Major earnings and data are scarce, the weekend beckons, and investors increasingly look ahead to next Tuesday’s jobs report.”
‘Price Worth Paying’
Diversification across geographies and themes is becoming a key consideration. After technology heavyweights drove equity gains for much of the year, concerns about stretched valuations and vast capital outlays have prompted investors to look for opportunities elsewhere.
“Given the set-up in markets, diversification is now the price worth paying to keep you fully invested in equities,” wrote Goldman Sachs’s Mark Wilson. He adds that there are compelling investment stories including Korea, Japan, China or the broader emerging markets.
Meanwhile, strategists at Goldman Sachs Group Inc. expect stocks to notch fresh records next year, citing resilient economic growth and broader adoption of artificial intelligence to support corporate earnings.
The team led by Ben Snider reaffirmed its target for the S&P 500 to reach around 7,600 points in 2026, implying gains of about 10% from current levels. Other forecasters and asset managers share the upbeat view, with strategists at firms including Morgan Stanley, Deutsche Bank AG and RBC Capital Markets LLC also calling for US stocks to rise more than 10%.
Market forecasters are broadly positive on Europe as well, with not a single one of the 17 strategists surveyed by Bloomberg expecting a major decline. Four strategists, including those at UBS Group AG and Deutsche Bank AG, project gains of nearly 13% from Wednesday’s close.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
