KEY POINTS
- US jobs growth came in much stronger than expected (172,000 vs about 85,000 forecasted), wiping out hopes of near-term Federal Reserve rate cuts.
- Higher rate expectations hit richly valued growth stocks hardest, especially AI and chip names.
- Nvidia (NASDAQ: NVDA), Micron (NASDAQ: MU) and Marvell (NASDAQ: MRVL) all fell as investors rotated out of high-multiple chip stocks.
- The selloff began with disappointment over Broadcom’s (NASDAQ: AVGO) AI outlook, then accelerated after the jobs report.
How bad was the selloff?
Friday was rough. The tech-heavy Nasdaq fell 4.18% to 25,709, its worst day since April 2025. The S&P 500 dropped 2.64% to 7,383, and the Dow lost more than 600 points. The pain hit chipmakers hardest: Nvidia (NASDAQ: NVDA) fell about 6%, Micron (NASDAQ: MU) sank around 13%, and Marvell (NASDAQ: MRVL) dropped roughly 16%. Just one day earlier, the Dow had closed at a record high, so this was a fast, sudden turn.
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Why Did Stocks Crash on a Strong Jobs Report?
This is the part that confuses people. The US economy added 172,000 jobs in May. That was almost double the 85,000 jobs economists expected, and unemployment held steady at 4.3%. Normally, that is good news. But right now, a strong economy means prices are likely to keep rising. And if prices keep rising, the Federal Reserve is less likely to cut rates and may even raise them.
This is a problem for fast-growing tech and AI companies. Their value rests on profits expected years from now, and higher rates make those future profits worth less today. Higher rates also make safer options like bonds more appealing, so investors pull money out of risky shares. In simple terms, good news for the economy turned into bad news for stocks.
Was it only about the jobs report?
No. The jobs report added fuel to a fire that was already burning. Days earlier, Broadcom (NASDAQ: AVGO) spooked the market by guiding to US$16 billion in next-quarter AI chip sales, below the roughly US$17.2 billion analysts expected, and by repeating rather than raising its longer-term AI target. Despite an earnings beat, that soft outlook sent Broadcom shares down about 14%, erasing close to US$280 billion in value and stoking fears that AI spending may be slowing. The strong jobs report then pushed the selling much further.
The Investor’s Takeaway
We believe this looks more like a sharp dip than a real breakdown. Company profits did not suddenly get worse; what changed was the outlook for interest rates and worry that AI stocks had become too expensive. For long-term investors, big dips like this can create buying chances, but the risk is clear: if the Fed gets tougher on rates, expensive tech could stay weak for a while.
For Australian investors, the timing is tricky. The ASX is closed on Monday for the King’s Birthday holiday and reopens on Tuesday. So local tech names like WiseTech Global (ASX: WTC) and Xero (ASX: XRO) will react then. The simple thing to watch is where US shares and interest rates go next.
The bottom line: stocks did not crash in spite of the strong jobs report. They crashed because of it. Strong data revived fears of higher interest rates, the one thing high-flying AI stocks fear most.
