Market Shift: AI Bubble Concerns and Rising Treasury Yields Shake Wall Street

Wall Street experienced declines as technology stocks faced sell-offs amid AI bubble concerns, driven by Broadcom's margin warnings and Oracle's weak forecast. Rising U.S. Treasury yields added to the market pressure, while upcoming labor market and inflation data kept investors cautious. Defensive sectors saw mild gains.

On Friday, Wall Street's key indexes experienced a downturn as investors moved away from technology stocks, stirred by fresh apprehension over an artificial intelligence (AI) driven bubble and the impact of climbing U.S. Treasury yields. Concerns were heightened after Broadcom and Oracle revealed disappointing forecasts that fueled fears regarding the financial viability of recent AI investments.

Treasury yields surged when Federal Reserve officials expressed unease over inflationary pressures, pushing back against monetary easing. In response to Broadcom's warning of diminished future margins, its shares plummeted 11.4%. Oracle followed suit, with its shares sliding after presenting a bleak forecast, despite rejecting claims of data center delays for ChatGPT maker OpenAI.

Particularly affected were tech stocks, with the Philadelphia semiconductor index falling 4.8%. Amid this turmoil, defensive sectors like consumer staples saw minor gains, while large-cap and small-cap indexes showed minimal growth. Overall market caution persists ahead of significant labor and inflation reports due next week.

(With inputs from agencies.)