Tumbling tech stocks drag Wall Street to its worst day in 3 weeks

NEW YORK (AP) — More drops for superstar artificial-intelligence stocks knocked Wall Street off its record heights on Friday.

The S&P 500 fell 1.1% from its all-time high for its worst day in three weeks. The weakness for tech stocks yanked the Nasdaq composite down by a market-leading 1.7%, and the Dow Jones Industrial Average gave back 245 points, or 0.5%, after setting its own record the day before.

Broadcom dragged the market lower and tumbled 11.4% even though the chip company reported a stronger profit for the latest quarter than analysts expected. Analysts called the performance solid, and CEO Hock Tan said strong 74% growth in AI semiconductor revenue helped lead the way.

But investors may have been concerned with some of Broadcom’s financial forecasts, including how much profit it can squeeze out of each $1 of revenue. The AI heavyweight may also have simply run out of momentum after its stock came into the day with a surge of 75.3% for the year so far, more than quadruple the S&P 500’s gain.

Broadcom’s drop added to worries about the AI boom that flared a day before. That’s when Oracle plunged nearly 11% despite likewise reporting a bigger profit for the latest quarter than analysts expected.

Questions remain about whether all the spending that Oracle is doing on AI technology will produce the kind of profits that make it worth the expense, along with how the tech giant will pay for it. Such doubts are dogging the AI industry broadly, even as many billions of dollars continue to flow in.

Broadcom was the heaviest weight on the S&P 500 Friday, followed by Nvidia. The chip company that’s become the poster child of the AI boom fell 3.3%. Oracle fell another 4.5%.

The stock market also felt some pressure from the bond market, where the yield on the 10-year Treasury climbed to 4.18% from 4.14% late Thursday. Higher yields can discourage investors from paying high prices for stocks and other investments, particularly when critics say they already look too expensive.

Friday’s drops for AI superstars continue a jagged return toward Earth after they earlier had been the main engine lifting Wall Street higher. Other stocks that used to struggle with uncertainty about the U.S. economy’s strength and what the Federal Reserve will do with interest rates, meanwhile, have been doing better.

The stocks in the Dow Jones Industrial Average, which has much less of an emphasis on tech, rose 1% this past week. That’s much better than the Nasdaq composite’s drop of 1.6%.

Notwithstanding Friday’s rise in yields, investors have been feeling more optimistic about interest rates. The Fed earlier this week cut its main interest rate for the third time this year and indicated another cut may be ahead in 2026.

Wall Street loves lower rates because they can boost the economy and send prices for investments higher, even if they potentially make inflation worse.

The Fed’s chair, Jerome Powell, did hint on Wednesday that interest rates may be on hold for a while. But he helped soothe nerves when his comments appeared less harsh than some investors expected in shutting off the possibility of more cuts in 2026.

Stocks of companies that depend on spending by U.S. consumers were relatively strong Friday, as two out of every five stocks within the S&P 500 rose. Oil prices eased this week, which could help ease people's bills, and hopes are rising that easier interest rates will help support spending.

Chipotle Mexican Grill rose 3.6%, McDonald’s climbed 2.3% and Norwegian Cruise Line added 1.5%.

The biggest gain in the S&P 500 came from Lululemon Athletica, which jumped 9.6% after reporting better profit and revenue for the three months through Nov. 2 than analysts expected. It also said its CEO, Calvin McDonald, plans to step down at the end of January following pressure to boost revenue.

All told, the S&P 500 fell 73.59 points to 6,827.41. The Dow Jones Industrial Average dropped 245.96 to 48,458.05, and the Nasdaq composite slumped 398.69 to 23,195.17.

In stock markets abroad, indexes fell modestly in Europe following a stronger finish in Asia.

Stocks jumped 1.7% in Hong Kong and rose 1.4% in Tokyo for two of the world’s bigger gains.

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AP Writers Teresa Cerojano and Matt Ott contributed.