Nasdaq Plunges 4.18% on Chip Selloff, Worst Day Since April 2025

The Nasdaq Composite dropped 4.18% to 25,709.43 on Friday, marking its worst day since April 2025. Chip stocks led the selloff after a stronger-than-expected May jobs report triggered fears of a Federal Reserve rate hike. The S&P 500 fell 2.64% to 7,383.74, snapping a nine-week winning streak. The Dow lost 1.35% to 50,866.78. For investors, this signals a sharp reversal in the AI-driven rally that had dominated markets.

Why Chip Stocks Crashed

Semiconductor stocks took the heaviest losses. The iShares Semiconductor ETF dropped 10% in its worst day since March 2020. Micron Technology fell 13%, Marvell Technology dropped 16%, and Intel and AMD each lost around 11%. Broadcom fell 8% after tumbling 12% the previous day. The semiconductor sector had gained 79% year-to-date before the selloff, making it vulnerable to profit-taking.

Jobs Data Fuels Rate Hike Fears

The U.S. added 172,000 jobs in May, more than double the expected 88,000. This strong labor market data raised concerns about persistent inflation and reduced the chance of interest rate cuts. Traders now price in a 72.7% probability of a Federal Reserve rate hike by year-end, up from 50.5% the day before. Rising Treasury yields following the jobs report intensified the selloff across growth stocks.

Broadcom’s Weak Outlook Sparked the Rout

Broadcom’s failure to raise its AI chip outlook Wednesday night triggered initial selling. But Friday’s losses reached a new level of intensity. Mark Hackett, chief market strategist at Nationwide, said investors had been hovering with their finger over the sell button after owning semiconductor names for two months. The combination of profit-taking and rate hike fears created a perfect storm.

Broader Market Pain and Volatility Spike

The S&P 500 lost more than 2% for the week, its first negative week in 10. The Nasdaq Composite fell 4.7% for the week. The Philadelphia Semiconductor Index erased more than $1 trillion in stock market value. The VIX jumped to its highest level since March, and S&P 500 options trading hit a record 7.8 million contracts at Cboe. Bitcoin tumbled below $60,000 for the first time since late 2024, signaling a broader retreat from speculative assets.

Final Thoughts

The Nasdaq’s 4.18% drop marks a hard stop to the two-month chip rally. With rate hike odds now at 72.7% and valuations stretched, investors should expect continued volatility in tech stocks until Fed policy clarity emerges.

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