Wall Street: Nasdaq Slips as Broadcom Drags Tech Sector Down Amid AI Uncertainty
- Why Did Broadcom Sink Despite Strong Earnings?
- How Did Major Indices Perform?
- What's Driving the Fed's Policy Shift?
- Which Stocks Made Notable Moves?
- What's the Outlook for Chipmakers?
- Key Questions Investors Are Asking
Wall Street closed mixed on Friday, with the Nasdaq falling nearly 1% as Broadcom's lack of concrete AI guidance spooked investors. While the Dow Jones hit a record high, tech stocks struggled, reflecting broader market volatility. The Fed's rate cut and mixed economic signals added to the turbulence, with analysts debating whether the rally can sustain into 2026. Here's a DEEP dive into the day's action and what it means for your portfolio.
Why Did Broadcom Sink Despite Strong Earnings?
Broadcom shares plummeted 10.4% despite smashing Q4 earnings expectations ($18.01B revenue vs $17.5B estimate). The crash came after CEO Hock Tan revealed a $73B AI product backlog spread over six quarters - numbers that somehow disappointed investors expecting faster returns. "We're seeing minimum commitments here," Tan clarified during the analyst call. "Delivery timelines range from 6-12 months depending on product type." The market reaction suggests Wall Street's AI patience is wearing thin after 2025's HYPE cycle.
How Did Major Indices Perform?
The tech-heavy Nasdaq dropped 0.96% to 23,367 points as semiconductor stocks bled. The S&P 500 lost 0.56% (6,862 pts), while the Dow Jones defied gravity with a 0.17% gain to 48,787 - another all-time high. "We're seeing rotation from AI darlings to value plays," noted the BTCC research team. Commodities saw WTI crude dip 0.6% to $57.30/barrel, while gold gained 0.8% to $4,316/ounce.
What's Driving the Fed's Policy Shift?
The Federal Reserve cut rates by 25 basis points to 3.50-3.75% on Wednesday, marking its fourth reduction since September. CME FedWatch now prices a 75.6% chance of unchanged rates at the January 28, 2026 meeting. Chairman Powell emphasized patience: "With 175bps of cuts behind us, we're well-positioned to wait for clearer employment signals." Dissent came from Chicago Fed's Goolsbee and Kansas City's Schmid, who favored holding rates, while TRUMP appointee Miran pushed for a 50bp cut.
Which Stocks Made Notable Moves?
- Lululemon (+9.6%): Beat Q3 estimates with $2.57B revenue (+7% YoY) and $2.59 adjusted EPS vs $2.20 consensus. CEO McDonald will step down in January 2026 after shares halved this year.
- Costco (-1.1%): Posted $67.3B Q1 revenue (+8.3%) with $4.34 EPS beating forecasts. Membership fees (high-margin) jumped 14% to $1.33B.
- Netskope (-11.5%): Cybersecurity firm reported a $453M loss despite 33% revenue growth to $184M. Q4 guidance disappointed.
What's the Outlook for Chipmakers?
Intel tested equipment from China-sanctioned ACM Research for its 14A chip process (2027 launch), per Reuters. Meanwhile, Nvidia told Chinese clients it may boost H200 AI chip production amid overwhelming demand from Alibaba and ByteDance. The Trump administration will allow these sales while taking 25% revenue cuts.
Key Questions Investors Are Asking
Is the tech selloff just profit-taking or something worse?
The BTCC team sees this as healthy rotation after 2025's AI frenzy. Broadcom's guidance wasn't terrible - just more measured than hype-driven expectations.
How will Fed policy impact 2026 markets?
With inflation still at 2.4% (above the 2% target), Powell's "wait-and-see" approach makes sense. The DOT plot suggests just one more 25bp cut next year.
Are commodity moves signaling recession?
Not necessarily. Gold's rise reflects dollar weakness (-0.1% on DXY), while oil dips on tempered demand forecasts. Watch the 10-year Treasury yield for clearer signals.
