AI Selloff Ends Wall Street’s Winning Streak

Stocks sold off sharply Friday as a hotter-than-expected May jobs report pushed Treasury yields higher and forced investors to reassess the Fed path, with markets increasingly pricing in the possibility of a rate hike rather than cuts. The pressure was most acute in technology and AI-linked shares, where valuation concerns and profit-taking hit semiconductors and mega-cap growth stocks hard. The dollar rose, crypto fell, and commodities weakened, reinforcing a broad risk-off tone across markets.

Key Headlines & Market Movers:

• Strong Jobs Data Reprices the Fed Path: May payroll growth topped expectations while unemployment held steady, signaling a more resilient labor market than investors had anticipated. That resilience lifted Treasury yields and strengthened the dollar as markets moved closer to pricing in a Fed rate hike later this year. The key concern is that firm hiring, alongside persistent inflation risks, gives policymakers less room to ease and may even force a tighter stance.
• AI and Semiconductor Shares Lead the Rout: The Nasdaq 100 suffered its steepest drop since April 2025 as investors took profits in the AI leaders that had powered the market’s recent rally. Semiconductor shares were hit especially hard, with the chip index falling sharply and major AI-linked names including Broadcom, AMD, Micron, Marvell, Arm, and Intel under heavy pressure. The move reflected growing concern that valuations had run ahead of fundamentals, even after a strong earnings season.

Risk-Off Moves Spread Beyond Equities: The selloff extended into crypto, commodities, and bonds, with Bitcoin sliding toward the $60,000 level and Ether falling sharply. Oil declined again despite geopolitical concerns, while gold also dropped as higher yields and a stronger dollar weighed on precious metals. Corporate news added to the pressure, including weakness in Lululemon after guidance cuts and reports of potential AI-related policy and deal developments involving major technology firms.

S&P 500 Sector Performance

Looking Ahead

Next week’s focus will be on whether the market stabilizes after the sharp AI-led reset or whether higher yields continue to pressure long-duration growth stocks. Investors will also look ahead to the Fed’s June 16-17 meeting, where Chair Kevin Warsh will face a stronger labor-market backdrop and persistent inflation concerns. The central question is whether Friday’s move proves to be a short-lived repricing or the start of a broader rotation away from crowded AI and momentum trades.

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