Tldr:
- The US added 172,000 jobs in May, nearly doubling expectations and raising the odds of a rate hike to 57% in one day.
- Broadcom’s refusal to raise its AI targets sent shares down 12.6%, raising concerns that the value of its AI positions was overvalued.
- SemiAnalogy reported that Nvidia’s new chips needed half the memory expected, sending SK Hynix and Samsung shares sharply lower.
- The $4-5 trillion listings of SpaceX, Anthropic and OpenAI are forcing fund managers to sell their holdings to raise cash.
Global financial markets suffered a widespread and sharp decline on Friday, losing nearly $2.5 trillion in a single trading session.
The S&P 500 fell 1.65%, while the Nasdaq fell 2.60%. Gold, silver and Bitcoin also recorded heavy losses. A combination of stronger-than-expected jobs data, cracks in AI trading, and looming liquidity concerns led to a broad sell-off across asset classes.
Hot jobs report shakes interest rate cut expectations
the American economy Jobs added 172,000 jobs in May, nearly double Wall Street’s forecast of 88,000 jobs. This surprising reading sent shock waves through the markets immediately after the open.
With inflation at 3.8% and oil prices at $90 a barrel, strong labor data has sharply changed interest rate expectations.
The probability of an interest rate hike by the Federal Reserve this year jumped from 40% to 57% in one session. Higher rates reduce the present value of future earnings, making growth and technology stocks less attractive. Investors responded by rotating out of those positions quickly.
As market analyst Bull Theory’s account on X pointed out, “A labor market this strong tells the Fed that it cannot afford to lower interest rates and may actually need to raise them.” This shift in sentiment has accelerated selling pressures across equity markets.
Adding to the uncertainty is the presence of a new head of the Federal Reserve Kevin Warsh He is holding his first political meeting in 11 days. Appointed amid expectations of lower interest rates, he now faces hot inflation, rising oil prices and a tight labor market. This uncertainty alone has pushed many fund managers towards reducing risk.
AI trading is cracking under pressure from multiple fronts
Broadcom reports record quarterly profits, with revenue up 48% Artificial intelligence chip Sales rise 143% However, the stock fell 12.6% after the company refused to raise its AI revenue targets. This single decision has investors wondering whether AI valuations have increased too much.
Research firm SemiAnasis then reported that Nvidia’s next-generation AI chips would require roughly half the memory previously priced in analyst models. SK Hynix stock fell nearly 10% on the news, while Samsung stock fell more than 6%. The broader market in South Korea fell 5.5% in one session.
Anthropic also released a report warning that AI systems are approaching the ability to improve themselves without human intervention. The company called for a global halt in the development of artificial intelligence.
As news of chip memory and the Broadcom fiasco emerged, it has deepened concerns about whether business models can sustain the current pace of AI growth.
At the same time, liquidity drain looms in the markets. SpaceX It is scheduled to go public next week, valued at $1.75 trillion. Anthropic and OpenAI are also making the lists.
Together, these three companies represent $4 trillion to $5 trillion in potential capital demand. Fund managers are selling their existing holdings to raise cash, adding more pressure to an already tense market.
