AI Fears Weigh on Markets Despite Fed's Optimistic Outlook

Futures for the S&P 500 and Nasdaq slipped following Broadcom's results, which sparked concerns of an AI-fueled bubble despite the Federal Reserve's less hawkish rate outlook. Investors shifted towards value stocks, and cannabis companies saw gains amid reports of planned U.S. marijuana policy changes.

Futures tied to the S&P 500 and Nasdaq declined on Friday amid growing apprehensions about an AI-fueled market bubble, following Broadcom's disappointing results. Investors, initially optimistic due to the Federal Reserve's unexpectedly dovish stance on 2026 interest rates, are now recalibrating expectations.

Broadcom's shares fell nearly 6% in premarket trading as the chipmaker indicated lower future margins from AI system sales, despite anticipating strong quarterly revenue. This stirred fresh concerns over the profitability of AI investments, impacting other chip stocks like AMD and Nvidia, which also slipped.

While the market remains cautious, value stocks have seen an uptick. The Russell 2000 outperformed thanks to a shift from tech to healthcare ahead of expected rate cuts. Investors are also closely monitoring upcoming economic data and comments from Federal Reserve policymakers.

(With inputs from agencies.)