The S&P 500 closed sharply lower Friday as chip-led dip in tech triggered a sea of red across stocks as recent guidance from AI-linked companies including chipmakers cooled investor sentiment on the AI trade.
At 4:00 p.m. ET, the Dow Jones Industrial Average fell 245 points, or 0.5%, while the S&P 500 index fell 1.1%, and the NASDAQ Composite slipped 1.7%.
Broadcom falls on margin concerns Broadcom (NASDAQ:AVGO) fell sharply after the AI server chips maker said its high-margin, non-AI business was set for a muted current quarter. The company also signaled that a major data center deal with OpenAI will not begin yielding returns until at least 2027.
Broadcom beat expectations for its fiscal fourth-quarter earnings, and also forecast above-consensus revenue for the current quarter. Additionally, the company flagged an AI order backlog of $73 billion over the next 18 months.
Some analysts also raised questions over Broadcom’s biggest customers sourcing AI data center chips on their own– a move the company said at least two clients were considering.
The souring sentiment in Broadcom comes a day tech after a downbeat financial forecast from cloud-computing giant Oracle raised concerns over the potential for over-extended valuations.
Other chipmakers fell in tandem, with Micron Technology Inc (NASDAQ:MU). Lam Research Corp (NASDAQ:LRCX), Marvell Technology Inc (NASDAQ:MRVL), Advanced Micro Devices Inc (NASDAQ:AMD), and NVIDIA Corporation (NASDAQ:NVDA) down.
Elsewhere, Costco (NASDAQ:COST) beat Wall Street estimates for first-quarter revenue on Thursday, on the back of resilient demand from consumers across income groups amid rising economic uncertainty. Lululemon Athletica (F:33L) shares soared following the athleisure group’s announcement of the departure of CEO Calvin McDonald and a heightened full-year profit forecast.
Fed dovish stance to boosts, but valuations remain a concern With investors still pricing in at least 50 bps of monetary easing next year on expectations that U.S. President Donald Trump’s appointee to the Fed Chair will likely be a policy dove, BCA Research expects 2026 to be a constructive year for equities.
In a new outlook, the firm says “monetary easing, fiscal support, GenAI-related capex, and strong earnings growth are unequivocally positive” for stocks, but stresses that “valuations are extended,” and concerns about a bubble are “overstated.”
BCA Research forecasts the S&P 500 will end next year between 7,200 and 7,500, implying “only 5–10%” returns.
Goldman Sachs also takes a positive view of the U.S. equity market moving into 2026.
