Nasdaq Plummets 4% Amid 'Employment Surprise', Is the AI Rally Over?

On June 5 in New York, the stock market experienced its sharpest pullback of the year as semiconductor and big-tech shares plunged. The S&P 500 fell 2.6%, the Dow Jones Industrial Average dropped 1.4%, and the Nasdaq—heavy in technology stocks—tumbled more than 4%, marking its largest one-day decline since October.

Early in the session, the U.S. Labor Department reported that nonfarm payrolls in May rose by 172,000—well above the roughly 80,000 expected—and the unemployment rate held steady at 4.3% for the third consecutive month. The robust jobs data heightened expectations of further Federal Reserve rate hikes: markets now assign a mid-to-high-60% probability to at least one increase by year-end. Meanwhile, the two-year Treasury yield climbed to 4.16%, a one-year high. With incoming Fed Chairman Kevin Warsh’s first FOMC meeting scheduled for June 16–17, investors are swiftly pricing in a “hold today, hike later” scenario.

On the corporate front, AI and chip stocks led the downturn. Nvidia slid about 6%, Broadcom lost roughly 7%, and Micron plunged over 13%, dragging the S&P technology sector down more than 6%. Weak results and guidance from Broadcom, coupled with lofty valuations, erased tens of billions in market capitalization among U.S.-listed semiconductor firms in a single session. Meta also fell more than 5% after reports surfaced that it may issue additional shares to fund AI infrastructure investments.

The broader environment remains unfavorable for risk assets. Conflict in Iran and a fragile ceasefire pushed Brent crude back toward $98 a barrel, stoking inflation concerns. Strong employment data, elevated oil prices, and rising bond yields weighed on gold and Bitcoin as well, reinforcing the view that richly valued growth and tech stocks are being reassessed. In the near term, shifts in Fed rhetoric, movements in bond yields, and oil-price dynamics appear poised to drive U.S. equity market volatility.