Tech is cracking today. I am tracking a fast sell‑off across big AI names, led by Broadcom’s ugly guidance. The Nasdaq and S&P 500 slipped as high‑growth stocks took a hit. The Dow held green, up about 0.3 percent, thanks to its lower tech weight. This rotation arrived right after a Fed rate cut, and rising bond yields are adding pressure.
What moved the market
Broadcom dropped about 10 percent after warning on profit margins. That shook confidence in the AI supply chain. Oracle fell, Nvidia slipped around 3 percent, and other AI winners eased. The message is simple. Investors want proof that AI profits can match AI prices.
The backdrop is tricky. The Fed cut rates this week for the third time in 2025, taking the target to 3.50 to 3.75 percent. That is a supportive stance, yet the 10‑year Treasury yield climbed to about 4.18 percent. Higher yields tend to hurt pricey, long‑duration growth stocks. I am seeing that play out in real time.
At the same time, money is moving into value and cyclicals. Healthcare, industrials, and staples drew buyers. Lululemon jumped about 10 percent on strong results. Breadth improved as more non‑tech names advanced, even while the big tech complex sagged.
In this tape, margins matter more than headlines. Watch guidance, not just revenue growth.
Rotation or correction
Is this a healthy handoff or the start of something bigger in AI megacaps? Here is my read. Part of this is a needed reset. AI leaders had stretched valuations and little room for error. Broadcom’s margin caution was the spark that exposed that tight rope.
That said, the broader market looks sturdier than the Nasdaq suggests. The Dow’s gain and the cyclical bid say investors are not fleeing risk, they are rebalancing it. If yields hold near 4.18 percent and earnings outside tech keep improving, rotation can support the indexes. If yields lurch higher, or AI earnings get cut again, this can deepen into a correction for the AI complex.
- What I am watching next:
- The 10‑year yield path relative to 4.20 percent
- Earnings revisions for the AI supply chain
- Sector breadth, not just the index level
- Fed speakers on the pace of cuts in 2026
Rising yields can compress high‑multiple stocks fast. Protect gains and avoid oversized single‑name bets.
Portfolio moves to consider
Stay balanced. A barbell makes sense in this market, with quality value on one side and selective growth on the other. Favor companies with strong cash flow, pricing power, and clean balance sheets. Those traits matter when rates rise and margins come into question.
Be patient with AI exposure. The long‑term theme is intact, but leadership can change. Use staged buys rather than chasing bounces. Look beyond the headline winners to suppliers and enablers with reasonable prices.
Short‑term Treasuries still offer income. That can cushion equity swings while you wait for better entries. In equities, healthcare, industrials, and staples are showing relative strength. Keep position sizes modest around event risk like earnings.
Global markets are absorbing this shock. Europe and Asia opened higher on the Fed’s dovish tone, even as U.S. tech wobbled. If the dollar firms with yields, that can tighten global financial conditions. Watch that cross‑current into year end.
Frequently Asked Questions
Q: Why did tech drop today?
A: Broadcom flagged tighter margins, which shook faith in AI profits. That hit Oracle, Nvidia, and other AI plays. Higher bond yields added pressure.
Q: Is this the start of a bigger AI sell‑off?
A: It can be, if earnings estimates keep falling or yields rise further. If margins stabilize and yields ease, it looks more like rotation.
Q: How does a Fed rate cut square with rising yields?
A: The Fed sets short rates. Long yields move with growth and inflation hopes. Today, markets see decent growth, so long yields rose even as the Fed eased.
Q: Which sectors may lead if tech cools?
A: Healthcare, industrials, and staples have the bid today. Financials and select consumer names can also benefit if yields stay elevated.
Q: Should I sell my AI stocks now?
A: Avoid reactive moves. Review valuation and earnings visibility. Trim oversized positions, use staged buys, and keep diversification.
Conclusion
I am calling today a stress test for AI valuations, not a blanket market break. The Fed put a floor under growth, yet higher long yields are forcing discipline on price. If rotation holds and earnings broaden, the market can absorb a tech reset. If profits crack, AI leaders may see a deeper pullback. Stay nimble, stay balanced, and let the data lead.
