The U.S. stock selloff that began as a roughly $650 billion wipeout across Nasdaq and chip names turned into a much deeper market break on Friday, with about $1.7 trillion erased from equities as traders dumped AI, semiconductor and momentum-linked shares.
The S&P 500 fell 2.64% to 7,383.74, while the Nasdaq Composite lost 1,121.53 points, or 4.18%, to 25,709.43. The Dow Jones Industrial Average dropped 695.15 points, or 1.35%, to 50,866.78.
The move ended the S&P 500’s nine-week Friday-to-Friday winning streak and turned the earlier chip-led weakness into a broad risk reset. The Nasdaq suffered its worst one-day percentage decline since April 2025, while market breadth also weakened sharply as falling stocks heavily outnumbered gainers.
Chip Stocks Carry The Biggest Damage
The hardest hit area was semiconductors, where the AI trade finally cracked after months of aggressive buying.
U.S.-traded chipmakers lost about $1.3 trillion in market value on Friday. The PHLX Semiconductor Index sank 10.3%, its deepest one-day decline since March 2020, and extended its two-session loss to about 12%.
Nvidia fell about 6%, wiping more than $300 billion from its market value. Micron tumbled 13%, Marvell dropped 17%, AMD lost nearly 11%, and Broadcom’s weaker AI-chip outlook continued to pressure the group after a nearly 20% two-day slide.
That matters because chip stocks have been one of the main engines behind the 2026 equity rally. The selloff was not just a rotation out of one sector. It hit the market’s leadership group, forcing traders to question whether AI valuations had moved too far ahead of demand.
Strong Jobs Data Becomes Bad News
The trigger came from the labor market. The U.S. economy added 172,000 jobs in May, while unemployment held at 4.3%. The report was far stronger than expected and included upward revisions to prior months.
In normal conditions, resilient hiring would support stocks. This time, it landed in a market already worried about inflation. April CPI was still running at 3.8% year over year, with energy prices and broader cost pressure keeping the Federal Reserve under pressure.
That mix changed the market reaction. Instead of reading strong payrolls as a growth signal, traders treated them as evidence that the Fed has less room to cut and may need to stay hawkish for longer. Rate-sensitive growth stocks, AI names and high-multiple tech were punished first.
Warsh’s First Fed Meeting Now Looks Harder
The timing also puts more pressure on new Federal Reserve Chair Kevin Warsh. Warsh took the oath of office on May 22, and the next FOMC meeting is scheduled for June 16-17.
A June rate move is not the central expectation, but the tone of the meeting now matters more. If the Fed leans harder against inflation or refuses to validate rate-cut hopes, stocks may struggle to recover quickly from Friday’s break.
Markets now have two immediate tests. The first is whether chip stocks can stabilize after the $1.3 trillion wipeout. The second is the June 10 CPI report, which will decide whether the strong jobs report was just a growth surprise or the start of a more difficult inflation-and-rates trade.
The selloff started with overheated AI positioning, but it got worse because macro data removed the market’s safety net. Strong hiring, sticky inflation and stretched tech valuations are now pushing in the same direction, leaving traders with less room to buy the dip unless yields cool or the Fed softens its message before the June meeting.
