TLDR:
- The U.S. added 172,000 jobs in May, nearly doubling forecasts and pushing rate hike odds to 57% in one day.
- Broadcom’s refusal to raise AI targets triggered a 12.6% stock drop, sparking fears of overvalued AI positions.
- SemiAnalysis reported Nvidia’s new chips need half the expected memory, sending SK Hynix and Samsung shares sharply lower.
- SpaceX, Anthropic, and OpenAI listings worth $4–$5 trillion are forcing fund managers to sell holdings to raise cash.
Global financial markets suffered a broad and sharp decline on Friday, erasing approximately $2.5 trillion in a single trading session.
The S&P 500 dropped 1.65%, while the Nasdaq fell 2.60%. Gold, silver, and Bitcoin also recorded steep losses. A combination of stronger-than-expected jobs data, cracks in the artificial intelligence trade, and looming liquidity concerns drove the widespread sell-off across asset classes.
Hot Jobs Report Rattles Rate Cut Expectations
The U.S. economy added 172,000 jobs in May, nearly double Wall Street’s forecast of 88,000. That surprise reading sent shockwaves through markets almost immediately after the open.
With inflation running at 3.8% and oil prices at $90 per barrel, the strong labor data changed the rate outlook sharply.
The probability of a Federal Reserve rate hike this year jumped from 40% to 57% in one session. Higher rates reduce the present value of future earnings, making growth and tech stocks less attractive. Investors responded by rotating out of those positions quickly.
As noted by market analyst account Bull Theory on X, “A labor market this strong tells the Fed it cannot cut interest rates and may actually need to raise them.” That shift in sentiment accelerated selling pressure across equity markets.
Adding to the uncertainty, new Fed Chair Kevin Warsh holds his first policy meeting in 11 days. Appointed under expectations of rate cuts, he now faces hot inflation, elevated oil, and a tight labor market. That uncertainty alone pushed many fund managers toward reducing risk.
AI Trade Cracks Under Pressure From Multiple Fronts
Broadcom reported record quarterly earnings, with revenue up 48% and AI chip sales climbing 143%. Yet the stock fell 12.6% after the company declined to raise its AI revenue targets. That single decision prompted investors to question whether AI valuations had grown too stretched.
Research firm SemiAnalysis then reported that Nvidia’s next-generation AI chips would require roughly half the memory previously priced into analyst models. SK Hynix fell nearly 10% on the news, while Samsung dropped over 6%. South Korea’s broader market declined 5.5% in a single session.
Anthropic also released a report warning that AI systems are approaching the ability to improve themselves without human input. The firm called for a global pause in AI development.
Coming alongside the chip memory news and Broadcom’s miss, it deepened fears about whether business models can sustain the current pace of AI growth.
Meanwhile, a liquidity drain looms over markets. SpaceX is set to go public next week at a $1.75 trillion valuation. Anthropic and OpenAI are also preparing listings.
Together, these three companies represent $4 to $5 trillion in potential capital demand. Fund managers are selling existing holdings to raise cash, adding further pressure to an already stressed market.
