US tech stocks tumbled on Friday in a sell-off led by chipmakers and memory groups after a strong jobs report sparked bets that the Federal Reserve will raise interest rates by the end of this year.
The S&P index, a wide measure of the US market, closed 2.64 per cent lower, puncturing a dramatic stock market rally that has been led by companies exposed to the AI capital expenditure boom. The technology-heavy Nasdaq Composite closed almost 4.2 per cent lower, its worst day since April 2025 just one week before the hotly anticipated listing of Elon Musk’s SpaceX, set to be the biggest initial public offering in history.
The losses spread beyond the tech sector on Friday as the sell-off gathered pace, with declines for consumer cyclicals and basic materials groups after a hot US jobs report prompted fresh bets that the Fed will be forced to raise rates to cool the economy. Investors will now watch the opening of markets on Monday to see whether the trend continues.
US government bonds sold off sharply after the jobs data, with the two-year yield moving 0.12 percentage point higher to a 15-month high of 4.18 per cent and closing just slightly lower.
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“With inflation moving higher and the labour market improving considerably, the Fed is unlikely to ease policy in 2026,” said Raymond James chief economist Eugenio Alemán.
Arun Sai, senior multi-asset strategist at Pictet Asset Management, said that while much of the tech sector was relatively insensitive to interest rate rises, “in the very near term, given how extended momentum is and how concentrated trades are, the Fed turning hawkish could be the biggest risk”.
“We are sitting on a massive momentum rally,” he said, and higher interest rates “would damage” that.
US markets are braced for a wave of fresh equity supply ahead of SpaceX’s IPO next week and potential listings for AI start-ups OpenAI and Anthropic, both of which are likely to fetch valuations of about $1 trillion.
Alphabet’s plans to raise up to $85 billion in equity to fund its AI infrastructure investments, the largest such raising on record, will add to the deluge. Meta is also weighing plans to raise tens of billions of dollars in a stock offering to fund its AI ambitions.
Nerves about the market’s ability to absorb the extra supply are likely to intensify if this week’s sell-off persists. Meta’s shares were down as much as 7 per cent following the report of its planned fundraising in the Financial Times.
Chipmakers – the biggest winners of the recent rally – have fallen sharply after Broadcom failed to meet the most bullish revenue forecasts in its results after markets closed on Wednesday. The chipmaker’s share price was down by about 8 per cent on Friday, adding to a 12.5 per cent fall on Thursday.
The Philadelphia Semiconductor index fell 9.6 per cent on Friday, although it remains almost 80 per cent higher this year. Arm Holdings and Micron dropped more than 12 per cent, while Sandisk was down almost 9 per cent.
The sell-off has been felt around the world, with South Korean chip giant SK Hynix falling 10 per cent on Friday. Samsung Electronics dropped 6 per cent.
Analysts said the sell-off reflected the increasingly high bar for companies to impress investors after a stunning two-month tech rally. The S&P is down nearly 1 per cent since the start of the week, threatening to end a nine-week winning streak for the index.
Jordan Rochester, a strategist at Mizuho, said the “incredible move higher in stocks [was] probably due a drawdown”.
“What truly ends the cycle is if the earnings growth takes a turn, or simply does not live up to elevated expectations,” Rochester said, pointing to the Broadcom report. He said this “could be a one-off” and was “yet to be seen across the board”.
The narrowness of the rally has prompted alarm from some investors, who have noted the market is increasingly reliant on the tech sector to power earnings growth.
“Everything is really concentrated in this thematic,” said Nicolas Forest, chief investment officer at Candriam. “This is the elephant in the room – if we have questions or disappointment around results on AI, it will be very difficult to stay positive on risky assets.”
Christian Raute, head of markets trading strategy at Citi, said that in the discussion about mega-IPOs, “the one big thing that everybody misses is the market context”.
“If the real world that week dislikes equities, [the IPOs] will create even greater disruption,” Raute said. – Copyright the Financial Times Limited 2026
