The article discusses a significant decline in tech stocks, particularly in the semiconductor sector, following rising bond yields and concerns about AI companies' spending. The Nasdaq dropped 4.2%, marking its worst session in 14 months, largely due to a robust jobs report that led to increased borrowing costs. Key companies like Broadcom and Nvidia saw substantial losses, while the PHLX Semiconductor Sector index fell over 10%. Despite the recent downturn, semiconductor stocks remain up year-to-date. Additionally, there is ongoing debate in Washington about potential government ownership stakes in AI companies, raising inflation concerns as AI investment influences labor and resource demand.

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43 mins ago - Economy

Chips sector bloodbath drags Nasdaq down 4.2%

Nathan Bomey
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Illustration: Sarah Grillo/Axios

Tech stocks plunged Friday amid rising bond yields and concerns about the massive growth expectations that have been fueling the AI trade.

Why it matters: It was a bloodbath for chip stocks — the physical infrastructure underpinning the promising AI economy.

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Catch up after the closing bell on the day's biggest business stories. With Nathan Bomey.

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Zoom in: The Nasdaq plummeted 4.2% Friday, its worst session in 14 months, after a stronger-than-expected May jobs report triggered the jump in yields — which would make it more expensive for AI companies to maintain their spending binge.

Broadcom — which disturbed investors late Wednesday with its outlook for AI chips revenue — is now down more than 13% on the week.
Nvidia tumbled 6.2% Friday, falling below the $5 trillion market cap threshold.
The PHLX Semiconductor Sector index dropped over 10%, with Marvell Technology, Micron Technology, Intel and Advanced Micro Devices (AMD) all falling.
And Meta declined 5.5%, with the FT reporting that the company is considering selling shares to help fund its massive AI build-out.

The downturn came asWashington is immersed in chatter over whether the government should take an ownership stake in individual AI companies.

NOTUS reported Thursday night that OpenAI CEO Sam Altman has discussed the idea with senior Trump officials,including directly with the president in early 2025 and "in recent weeks" with senior leaders.
Earlier this week, Sen. Bernie Sanders (I-Vermont) proposed the U.S. government take a 50% ownership stake in the AI companies.

The intrigue: AI spending has also reignited inflation fears.

Some Fed officials see clearer evidence of AI-related investment boosting demand for labor, equipment and infrastructure than they do of widespread productivity gains, Axios Macro co-author Courtenay Brown reported.
The upshot: Inflation risks look more immediate than any AI-related productivity benefits, especially as inflation remains stubbornly above the Fed's target.

Yes, but: Chip sector stocks are still well in the green year to date, even after this week's pullback, with Nvidia up 10%, and Broadcom up over 11%.

The Nasdaq closed Friday up 10.6% on the year.
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Chips sector bloodbath drags Nasdaq down 4.2%

Chips sector bloodbath drags Nasdaq down 4.2%

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