Nasdaq Falls 4% on Growing Caution Over AI Investment

2026-06-06

Nasdaq Falls 4% on Growing Caution Over AI Investment, Semiconductors Slide Sharply

Heavy Selling Hits Semiconductor Stocks

The Nasdaq Composite Index, which has a high weighting of tech shares, finished the U.S. trading session on the 5th down 4% from the previous day at 25,709. It marked the index's biggest drop in about a year, since the slide triggered by reciprocal tariffs in April 2025. Semiconductor stocks fell broadly as investors grew wary of overheated artificial intelligence-related investment.

The Philadelphia Semiconductor Index, or SOX, dropped 10%. According to QUICK and FactSet, the market capitalization of the index stood at $15 trillion, or about 2,500 trillion yen, as of the 4th, meaning roughly $1.6 trillion, or about 250 trillion yen, was wiped out in a single day. Broadcom's earnings released on the 3rd for the February-April 2026 period triggered selling after its revenue outlook for AI semiconductors came in below market expectations. The company's shares fell another 7.9% on the 5th.

Jobs Data and Rising Yields Add Pressure

In the May U.S. employment report released on the 5th, nonfarm payrolls rose far more than expected, strengthening expectations that the U.S. Federal Reserve will raise rates. Higher yields weighed on stocks, and selling spread beyond semiconductors. Marvell Technology fell 16.7%, Micron Technology lost 13.3%, Advanced Micro Devices, or AMD, dropped 10.9%, and Qualcomm declined 11.0%.

Ulrike Hoffmann-Burkhardt of UBS Global Wealth Management said that, in addition to Broadcom's outlook, a research report showing slowing memory demand also dampened investor sentiment. Matthew Maley, chief market strategist at Miller Tabak in the U.S., said that if the decline in tech stocks deepens, the impact on the broader market would be significant.

Major Indexes Also Fall

The Dow Jones Industrial Average closed down $695 at $50,866, while the S&P 500 index finished down 200 points at 7,383.74. The S&P 500 fell 3% for the week, snapping a nine-week winning streak. A 10th straight weekly gain would have marked its longest run since 12 weeks in 1985.

Christopher Rupkey of U.S. financial research firm FWDBONDS said the Fed should prioritize inflation risks as the economy is overheating and cannot justify cutting rates. In the FedWatch tool, which is based on interest rate futures, the view that the policy rate will be left unchanged at the June Federal Open Market Committee meeting has reached 90%. Stephen Brown of Capital Economics in Britain expects two rate hikes, in September and October.

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