NEW YORK: Wall Street’s main indexes dropped on Friday as AI anxiety hammered technology stocks, with the Nasdaq and the S&P 500 on pace for their steepest monthly loss since March 2025, while hotter-than-expected inflation data also weakened sentiment.
Technology shares faced selling pressure this month as concerns over high valuations and the uncertain payoff from Big Tech’s massive AI spending grew.
Nvidia slid 2.4 percent after plunging more than 5 percent in the previous session despite strong earnings, a sign that risk sentiment for all things AI remained shaky.
The broader technology index tumbled 1.7 percent, while financials dropped 2.1 percent, with both poised for sharp monthly declines.
Big banks including Goldman Sachs and private credit firms such as KKR & Co were among the biggest laggards.
Jefferies dropped 9.5 percent after media reports that the investment bank and other lenders face potential losses related to the collapse of UK mortgage provider Market Financial Solutions Ltd.
Risk appetite also took a hit after data showed US producer prices increased more than expected in January, suggesting inflation could pick up in the coming months.
“Inflation has reared its ugly head, and the questioning of the true value of technology firms has resulted in a major selloff,” said Ben Fulton, CEO of WEBs Investments.
While losses in cyclical sectors dominated on Friday, investors appeared to rotate towards more defensive sectors, with consumer staples, utilities and healthcare rising more than 1 percent each.
At 11:47 a.m. ET, the Dow Jones Industrial Average fell 602.06 points, or 1.22 percent, to 48,897.14, the S&P 500 lost 45.92 points, or 0.66 percent, to 6,862.94, and the Nasdaq Composite was down 226.61 points, or 0.99 percent, to 22,651.77.
Earlier in the day, brokerage UBS said it had cut its recommended allocation to US equities to “neutral”, citing the relatively lower sensitivity of US corporate earnings to global growth as well as high valuations among other reasons.
Tariff uncertainty also fueled volatility this month after the US Supreme Court struck down most of Trump’s 2025 duties, prompting a temporary 10 percent global tariff that began on Tuesday.
Zscaler plunged 15 percent after the cloud security firm reported a wider net loss in the second quarter. The broader software index lost 1.9 percent. Software shares and several industries were rocked earlier this year too, on fears of industry wide AI-driven disruptions. Netflix added 10 percent as investors cheered its decision to exit the fight for Warner Bros Discovery, which dropped 2.1 percent. Paramount Skydance rose 18 percent after winning the race for some of the world’s most prized TV and film assets.