AI trade jitters spark tech sell-off as Dow Jones leads gains
United States (US) stocks closed sharply lower on Friday, with Broadcom tumbling in the wake of Oracle’s post-earnings sell-off, dragging the broader artificial intelligence (AI) complex with it.
The move accelerated a rotation out of technology names into cyclicals and defensives. For the week, the Dow Jones posted its highest weekly close on record, gaining 503 points (+1.05%). In contrast, the S&P 500 shed 0.63%, while the Nasdaq 100 fell a steep 1.93%.
This stark contrast in performance across the major US equity indices is a classic example of intramarket divergence – where markets within the same asset class move in opposing directions at or near new highs. Such divergences often appear at important turning points and tend to carry the most weight when confirmed by other technical signals or fundamental developments.
On the fundamental side, concerns around the AI trade – sky-high valuations and capital expenditure (capex) outpacing earnings – were reignited last week. Oracle missed revenue forecasts and raised financial year (FY) 2026 capex guidance by approximately $15 billion. Broadcom beat estimates but flagged margin pressure from a rising mix of lower-margin custom AI chips.
Key data ahead
Looking ahead, this week brings the combined October to November non-farm payrolls (NFP) report and the November consumer price index (CPI) print. The November inflation data is expected to show core inflation holding near 3%, while the expected outcome of Wednesday morning’s NFP report is previewed below.
US non-farm payrolls
Date: Tuesday, 16 December at 1.00pm BST
The September NFP report, which was finally released nearly seven weeks late due to the US government shutdown, offered a sliver of relief after a dismal August print. NFP rose by 119000, beating consensus expectations of just 50,000 additions. The unemployment rate ticked up to 4.4% from 4.3% prior.
The Bureau of Labor Statistics (BLS) announced on 19 November that it would not publish a full Employment Situation report for October due to the government shutdown. The BLS will salvage what it can, folding October’s partial NFP data into this week’s November release.
The market has pencilled in a rise of 50,000 in November, with the unemployment rate remaining at 4.4%. The interest rates market is pricing in two full 25 basis point (bp) Federal Reserve (Fed) rate cuts in 2026.