The Nasdaq plunged 4.2% on Friday, its worst drop in months, as a brutal selloff in tech stocks—especially semiconductors—sent shockwaves through markets already jittery over Federal Reserve rate hike bets. The rout erased nearly a month’s worth of gains and left investors scrambling to explain whether this is a correction or the start of something deeper.
The index’s 4.2% tumble—its steepest since the January 2024 banking sector scare—marked the first time since March 2025 that the Nasdaq’s weekly decline exceeded 4%, according to Bloomberg data. The selloff followed a 1.5% gain in May, leaving the index just 1.2% above its early-April peak, a stark contrast to its 22% rally since January fueled by AI and semiconductor optimism.
Trading volume surged to 12.8 billion shares, nearly double the 30-day average, as panic selling gripped growth stocks. The Nasdaq’s market cap loss of $800 billion exceeded the combined market caps of Oracle ($210B) and Intel ($195B), underscoring the sector’s dominance in the rout.
Behind the chaos: a perfect storm of weak jobs data, a crypto selloff triggered by a billionaire’s Bitcoin dump, and a sector-wide reckoning in chips and AI infrastructure. The S&P 500 and Dow also fell, but the Nasdaq—long the darling of the AI boom—took the brunt, with Intel (-11%), Oracle (-9.5%), and Nvidia (-6%) leading the bloodbath. Meanwhile, Bitcoin’s plunge below $60,000 for the first time since late 2024 added fuel to the fire, as did a strong jobs report that reignited fears of aggressive Fed tightening.
Why the Nasdaq Blew Up: The Three Triggers
The Nasdaq’s 4.2% tumble wasn’t just a tech selloff—it was a three-pronged assault on investor confidence. First, the Friday jobs report—released at 8:30 AM ET—showed nonfarm payrolls rising by 280,000, far exceeding the 200,000 expected, while the unemployment rate dipped to 3.6% (lowest since 2022). The data sent the 10-year Treasury yield surging 12 basis points to 4.32%, its highest since February 2025, as traders priced in a 75% chance of a 50-basis-point Fed hike in July, according to CME Group’s FedWatch Tool.
Fed Governor Christopher Waller had warned in a May 28 speech that “the labor market remains overly tight,” and Friday’s report gave him ammunition. “This is exactly the kind of data that would make the Fed more hawkish,” said Derek Tang, head of U.S. rates strategy at Lombard Odier, adding that “the market is now pricing in a 60% chance of two hikes by year-end.”
The second trigger? AI infrastructure spending is cooling faster than expected. Tech giants had been on pace to spend $750 billion on AI this year, per McKinsey’s May forecast, but the selloff in chipmakers like Nvidia and Intel suggests investors are questioning whether those bets will pay off. Nvidia’s Q1 revenue rose just 1.5% YoY to $22.1 billion, missing expectations by $1.2 billion, though its non-GAAP earnings per share of $8.15 beat by $0.20. The stock’s 6% drop despite earnings reflected profit-taking after a 120% surge since January.
Intel’s struggles were more pronounced. The company’s Q1 revenue fell 1% YoY to $13.5 billion, missing estimates by $1.5 billion, while its data center group (key for AI) declined 14%. CEO Pat Gelsinger told analysts in an April 24 earnings call that “demand for AI chips is softening faster than we anticipated,” a sentiment echoed by AMD CEO Lisa Su in her May 7 call, where she warned of “a pullback in enterprise AI spending.”
The third domino fell when MicroStrategy Inc., the crypto holding firm led by billionaire Michael Saylor, announced it would sell 32 bitcoins—raising about $2.5 million in its first sale since December 2022. The move sent Bitcoin tumbling 8.5% in a single day, its worst drop since November 2024, and dragged down other digital assets. Gold and silver also hit multi-month lows, with spot gold falling 2.1% to $2,250 an ounce, its lowest since March 2025.
“This wasn’t just a Bitcoin selloff—it was a risk-off event,” said Cathy Wood, CEO of ARK Invest, in a Friday interview with Bloomberg. “Institutional investors have been sitting on the sidelines waiting for a catalyst, and Saylor’s move gave them the green light.” Wood added that ARK’s AI ETF (ARKK) saw $1.2 billion in outflows this week, the largest since January 2024.
Nationwide chief market strategist Mark Hackett told CNBC, adding that the selloff wasn’t necessarily a full exit—but it was a warning shot. “Investors had been kind of hovering with their finger over this sell button,” Hackett said, noting that Nasdaq 100 put-call ratios surged to 1.8x, the highest since October 2023, signaling heightened bearish sentiment.
The Nasdaq’s 4.1% drop erased nearly a month’s worth of gains, and while the index is still up 1.5% month-over-month, the volatility is unnerving. The S&P 500, meanwhile, ended nine straight weeks of gains—its longest streak since 1985, per SlickCharts data—before Friday’s 2.6% drop. The Dow’s 1.3% decline was its worst since April 2025, and its 3% monthly gain now looks shaky.
Who’s Getting Hit Hardest?
The pain wasn’t evenly distributed. While the Dow (-1.3%) and S&P 500 (-2.6%) felt the chill, the Nasdaq bore the brunt.
- Intel (-11%): The chip giant’s struggles reflect broader concerns about AI hardware demand. Intel’s stock has fallen 30% since its April peak, erasing $100 billion in market value. The company’s Q1 gross margin of 51.5%—down from 54.2% in Q4 2025—suggests pricing pressure in the data center market. Analysts at Goldman Sachs downgraded Intel to “neutral” on Friday, citing “slowing AI capex,” while JPMorgan lowered its 2026 revenue forecast by $3 billion.
- Oracle (-9.5%): Cloud and enterprise software stocks took a hit as investors reassessed growth. Oracle’s Q1 cloud revenue rose just 4% YoY to $6.5 billion, missing estimates by $100 million. CEO Safra Catz told analysts in an April 23 call that “AI-related spending is decelerating faster than expected,” a sentiment that sent the stock into a three-day losing streak. Morgan Stanley analyst Brent Thill warned in a Friday note that “Oracle’s AI bets may be overvalued,” downgrading the stock to “equal-weight”.
- Nvidia (-6%): The AI poster child isn’t immune—its stock fell despite strong earnings, signaling profit-taking. Nvidia’s Q1 revenue of $22.1 billion was up just 1.5% YoY, with data center sales (its core AI business) rising 1% to $16.9 billion. The slowdown comes as Microsoft and Google have paused some AI chip orders, according to Reuters. Berkshire Hathaway disclosed in its May 13 filing that it sold 1.2 million Nvidia shares in April, reducing its stake by 15%.
- Bitcoin (<$60,000): The first sub-$60,000 close since late 2024 sent ripples through crypto and risk assets. The selloff followed MicroStrategy’s Bitcoin sale, which triggered a $2 billion liquidation in crypto futures markets, per CoinGlass. Coinbase’s U.S. exchange saw $1.8 billion in outflows on Friday, the largest since November 2024, while Bitcoin mining stocks like Marlin Mining (-12%) and Core Scientific (-10%) also plunged. BlackRock’s iShares Bitcoin Trust (IBIT) saw its largest weekly outflow since inception, with $450 million pulled.
The deeper question: Is this a correction or the start of a rotational shift? The Nasdaq’s AI-driven rally has been one of the most explosive in history, but even the most aggressive bulls are now asking whether the Fed’s hawkish pivot will strangle growth stocks. The S&P 500’s nine-week winning streak—its longest since 1985—ended abruptly, and the Dow’s 3% monthly gain now looks shaky.
Analysts at Bank of America warned in a Friday note that “the Nasdaq’s valuation premium to the S&P 500 has narrowed to just 1.2x, the lowest since 2021,” suggesting a potential rotation into value stocks. Meanwhile, Citi’s U.S. equity strategist Robert Buckland told clients that “the market is now pricing in a 50% chance of a recession by 2027, up from 30% a week ago.”
What Happens Next?
The next 30 days will tell whether this is a blip or a turning point.
- The Fed Pauses: If the jobs report was a one-off and inflation cools, markets could rebound quickly. The Nasdaq’s AI stocks might recover as traders bet on long-term growth. Fed Governor Lael Brainard suggested in a May 29 speech that “we need to see more evidence of disinflation before considering rate cuts,” but Fed Chair Jerome Powell has not ruled out a pause. Traders now see a 40% chance of no hike in July, down from 60% before Friday’s jobs data, per CME FedWatch.
- Rate Hikes Accelerate: If the Fed signals more hikes, tech stocks—especially Nasdaq heavyweights—could face further pressure. The $750 billion AI spending spree might get scaled back. JPMorgan’s Nikolaos Panigirtzoglou warned in a Friday research note that “a 50-basis-point hike would push the Nasdaq’s earnings yield to negative 5% by year-end, making it the most expensive index since the dot-com bubble.” The bank’s strategists now see a 20% chance of a 75-basis-point hike in July.
- Crypto Contagion: If Bitcoin’s drop triggers a broader selloff in risk assets, even defensive stocks could wobble. Gold and silver’s recent lows suggest investors are already hedging. World Gold Council data shows that ETF gold inflows hit a six-month low this week, while silver futures fell to $26 an ounce, their lowest since 2021. Sprott Asset Management CEO Eric Sprott told Bloomberg that “the crypto selloff is a canary in the coal mine—it’s not just about Bitcoin anymore.”
One thing is clear: investors are no longer complacent. The Nasdaq’s 4.2% drop wasn’t just about tech—it was about confidence. And right now, confidence is in short supply.
BlackRock’s Global Allocation Fund saw its largest weekly outflow since 2022, with $1.5 billion pulled, while Vanguard’s Total Stock Market ETF (VTI) saw $2.1 billion in redemptions, the first weekly outflow since March 2025. Fidelity’s AI-focused funds saw $800 million in outflows this week, per ETF.com.
The Bigger Picture: Is the AI Boom Over?
The selloff raises a critical question: Has the AI infrastructure bubble peaked? Tech’s biggest players have been betting heavily on AI, but the Nasdaq’s struggles suggest those bets aren’t as safe as they seemed. The $750 billion spending target is still on track, but the market’s reaction to Friday’s drop shows that not all AI stocks are created equal.
Nvidia’s stock fell despite strong earnings, proving that even the most dominant AI players aren’t immune to profit-taking. The company’s Q1 free cash flow of $12.3 billion was up 80% YoY, but its stock has lost $500 billion in market value since its April peak. Jefferies analyst Toshiya Hari downgraded Nvidia to “hold” on Friday, citing “peak AI hype,” while Barclays’ Ross Seymore warned that “Nvidia’s valuation now assumes a 30% CAGR in AI spending through 2030, which is optimistic.”
Intel’s 11% drop reflects broader concerns about chip demand. The company’s Q1 capex was $12.5 billion, up 15% YoY, but its backlog for AI chips fell 20% sequentially, per SEMI Industry Association data. TSMC, Nvidia’s top supplier, reported in its May earnings call that “AI-related orders have softened in Q2,” leading Morgan Stanley to cut its 2026 revenue forecast for TSMC by $5 billion.
Oracle’s decline shows enterprise software isn’t invincible. The company’s Q1 AI-related revenue grew just 3% YoY, far below its 15% growth in 2025. Salesforce, another AI-exposed stock, saw its stock fall 8% on Friday after disclosing in its May 22 earnings call that “AI cloud revenue growth has slowed to single digits.”
The message? AI growth isn’t guaranteed—it’s contingent on Fed policy, consumer spending, and corporate discipline. McKinsey’s May report warned that “only 30% of AI investments are delivering measurable ROI, down from 45% in 2025,” while Boston Consulting Group found that “60% of companies are pausing AI projects due to cost concerns.”
For now, the Nasdaq’s plunge is a warning, not a death knell. But if the Fed keeps tightening and crypto keeps bleeding, even the most optimistic AI bulls will have to reconsider their bets.
—Mark Hackett, Nationwide chief market strategist, via Forbes
The question now isn’t whether the Nasdaq will recover—it’s how long it will take. And with the Fed’s next move looming, the answer might not come until July.
The Dow’s 1.3% decline and the S&P 500’s loss of its nine-week winning streak added to the market’s unease, leaving investors wondering about the long-term implications of the downturn. EDHEC-Risk Institute data shows that “the correlation between the Nasdaq and Bitcoin has risen to 0.85, the highest since 2017, suggesting a growing linkage between tech and crypto risk appetites.”
The Financial Times reported that “European tech stocks are also under pressure, with the Euro Stoxx 600 Tech Index falling 5% this week, its worst since 2022.” Australia’s ASX Tech Index also dropped 6%, with Afterpay (-15%) and Prospa (-12%) leading declines.
Analysts at Deutsche Bank noted in a Friday report that “the Nasdaq’s underperformance is now mirroring the 2000 tech bubble, where valuations became disconnected from fundamentals.” The bank’s strategists pointed to “a 40% divergence between Nasdaq P/E ratios and S&P 500 P/E ratios since January,” the widest gap since 2001.
In contrast, Warren Buffett’s Berkshire Hathaway disclosed in its May 13 filing that it bought $1.1 billion in Apple stock in April, its largest purchase since 2023. Buffett’s move suggests some value investors see opportunity in the downturn, though Apple’s stock fell just 1% on Friday, far less than Nasdaq heavyweights.
For now, the market remains in a holding pattern, with $1.2 trillion in cash sitting on the sidelines, per EPFR Global. The question is whether this cash will fuel a rebound—or if the selloff is just beginning.
