U.S. stocks retreat from highs as Broadcom leads tech sell-off

The decline in artificial intelligence stocks persisted on Friday, leading to a significant sell-off in the tech sector across U.S. markets. Broadcom's shares plummeted by over 11%, raising investor concerns about diminishing profit margins and uncertain business deals. This drop had a ripple effect, causing other tech giants like Nvidia, Advanced Micro Devices, and Oracle to experience declines as well, ultimately resulting in major U.S. indexes finishing the day lower. Despite the Dow Jones Industrial Average making a 1.1% weekly gain largely supported by strong performance from financial stocks, the tech sector's struggles pulled down the S&P 500 and Nasdaq Composite, which fell by 0.6% and 1.6% respectively for the week. The market's reaction may have stemmed from fears of an emerging AI bubble, with investors on edge regarding any negative news. Broadcom, however, reported earnings that exceeded expectations and provided an optimistic outlook for the current quarter. Bernstein analyst Stacy Rasgon, who maintains a 'buy' rating on Broadcom, noted that the company's AI narrative continues to impress and accelerate. Meanwhile, UBS analysts remain positive about future prospects, predicting high profitability driven by advancements in AI, power resources, and longevity themes by 2026. In the short term, investor sentiment remains shaky, particularly until more reassuring news—like Oracle achieving positive cash flow—comes to light. This week saw U.S. stocks dragged down by AI-related names, with major indexes suffering losses just after reaching record highs. Asia-Pacific markets also faced downturns, with South Korea’s Kospi index falling approximately 1.5% during Monday trading. In other news, China’s economic slowdown deepened, despite year-on-year growth in retail sales and industrial production. However, these figures fell short of forecasts and reflected a slowdown from the previous month. Investment in fixed assets for the January to November period saw a contraction compared to last year. Additionally, a Hong Kong court found pro-democracy activist Jimmy Lai guilty of sedition and collusion, a ruling that has raised concerns among foreign investors. This week also highlighted tensions between Beijing and Washington over soybean purchases, showcasing shifts within China's agriculture industry. Analysts from Citi predict that copper prices could reach unprecedented highs due to increased demand from the energy transition and AI sectors.