AI Stock Sell-Off Erases Wall Street Record Highs
Major U.S. indices declined Friday as investor fears of an AI bubble and rising Treasury yields triggered a sharp sell-off in technology stocks.
Wall Street experienced a volatile reversal between December 11 and 12, 2025. The S&P 500 and Dow Jones Industrial Average initially hit record closing highs on Thursday, bolstered by corporate profits and a Federal Reserve interest rate cut to a range of 3.5%–3.75%. However, this momentum collapsed on Friday, marking the market's worst day in three weeks.
Broadcom Inc led a deepening sell-off in artificial intelligence stocks, with its shares plummeting over 11% despite reporting strong quarterly profits. Investors reacted poorly to warnings of slimmer future margins and a lower AI product backlog. Oracle also faced significant losses after announcing a $15 billion increase in AI capital expenditures for fiscal 2026, fueling fears of an AI bubble where massive spending fails to yield sufficient profitability. Nvidia and other chipmakers like AMD and Micron also declined as capital rotated into defensive sectors such as healthcare and financials.
Adding to the pressure, the 10-year Treasury yield rose to 4.18% after Federal Reserve officials expressed concerns that persistent inflation might prevent further monetary easing. While tech struggled, consumer-facing stocks showed resilience. Lululemon Athletica shares jumped 9.6% following positive financial results, though the company announced that CEO Calvin McDonald will step down at the end of January. The period highlighted a great divergence between high-growth tech valuations and established value-oriented sectors.
