Tech Rout Sparks US Stock Market Plunge, Nasdaq Sinks 1.9%

The US stock market faced one of its worst trading sessions in recent memory on Friday, with all three major indices closing sharply lower. The technology-heavy Nasdaq Composite bore the brunt of the selling pressure, sinking 1.9% as investors fled growth stocks. The broader S&P 500 fell 1.1%, while the Dow Jones Industrial Average, comprising more established blue-chip companies, posted a relatively modest but still significant 0.7% decline. The coordinated downturn reflected a market-wide reassessment of risk, particularly in sectors that had led the market’s gains throughout the year.

The selloff was not confined to a single sector but was notably concentrated in technology and growth-oriented names. Companies like Palantir, Tesla, and SoFi extended their recent steep losses, contributing significantly to the Nasdaq’s underperformance. This broad-based retreat from risk assets indicates growing investor concern about the sustainability of current valuations, especially in the face of mounting economic headwinds and shifting monetary policy expectations.

Among the most dramatic moves was Nvidia’s 4% plunge, directly triggered by the US government’s decision to ban exports of advanced AI chips to China. This development underscores the significant geopolitical risks facing the technology sector, particularly companies at the forefront of the artificial intelligence revolution. Nvidia, as a dominant player in AI semiconductor manufacturing, faces substantial exposure to Chinese markets, and the new restrictions threaten a key revenue stream.

The market’s reaction to the Nvidia news served as a catalyst for broader concerns about the AI sector’s valuation. The selloff in other AI-adjacent stocks suggests investors are beginning to price in not just company-specific risks but also systemic challenges to the entire AI ecosystem. The rapid decline in these previously high-flying stocks raises questions about whether the much-discussed AI stock bubble is beginning to crack under the weight of both regulatory pressure and economic uncertainty.

Compounding the technology sector’s specific troubles were worrying macroeconomic indicators that stoked fears of an economic slowdown. The University of Michigan’s consumer sentiment index dropped to 50.3, reflecting growing pessimism among American households about the economic outlook. Simultaneously, inflation expectations rose to 4.7%, indicating that consumers anticipate persistent price pressures despite the Federal Reserve’s aggressive tightening campaign.

This combination of weak sentiment and elevated inflation expectations creates a challenging environment for policymakers and investors alike. The data suggests consumers are bracing for both slower growth and higher prices—a scenario that typically weighs on corporate earnings and stock valuations. The market’s negative reaction to this economic data indicates investors are increasingly concerned that the Fed may struggle to engineer a soft landing for the economy.

While the broader market trend was decisively negative, individual stock performances highlighted the market’s selective nature during periods of stress. Take-Two Interactive crashed 9% following news of a delay for its highly anticipated Grand Theft Auto 6 release, demonstrating how company-specific developments can dramatically impact valuations even during market-wide downturns. The gaming company’s sharp decline shows that even in beloved franchises, execution risks remain paramount.

In contrast, Expedia jumped 17% on the back of strong earnings, proving that fundamentally sound companies can still reward investors even during broad market selloffs. The travel company’s impressive performance provided a rare bright spot in an otherwise gloomy trading session and served as a reminder that careful stock selection remains crucial during market turbulence. This divergence between winners and losers underscores the importance of focusing on company fundamentals rather than simply following broad market trends.