Investors perplexed by Nasdaq’s biggest drop since Trump’s tariffs

The tech-heavy Nasdaq index fell 4.2% on Friday, the biggest drop since Donald Trump’s “liberation day” tariff announcements in April 2025. After a strong report on US jobs, and surging optimism about AI, the sharp sell-off left investors – and the president himself – perplexed.

“With a great jobs report, like just announced, stocks should go up, not down,” he said. “That’s the way it was for 200 years.”

But the times they are a-changin’. US inflation is back up to 3.8% due to the war in Iran. Bond traders have been holding on to expectations that the Federal Reserve would cut rates because of a weak labour market. That thesis has been flipped by a surge in 731,000 new job openings, however, and the market now expects two rate hikes by early 2027.

Before that, on Wednesday, a lacklustre set of results from the chipmaker Broadcom sparked a wider pull-back in semiconductor stocks. The Philadelphia Semiconductor index, which tracks 30 major chip stocks and has climbed more than 80% this year, dropped by 10% on Friday.

“A parabolic move like most of these stocks have been experiencing is not sustainable under perpetuity,” Ross Mayfield, an investment strategist at Baird, told CNN.

Fears the market is becoming toppy haven’t dented big tech’s ambitions to raise more cash for data centres. Google’s parent company, Alphabet, announced last week it is planning to raise $80bn from stock sales to fund AI build-out. Meta is reportedly preparing to do something similarly “creative” to fund $145bn of AI-related capital expenditure this year.

And then there are the elephants in the room. The $75bn initial public offering for Elon Musk’s SpaceX is due to take place this Friday, ahead of two other gargantuan floats from Anthropic and OpenAI. Investors may be selling off to make some room for dessert (see page 38).

Whether this deluge of shares can be absorbed is a huge question. The three IPOs could together equate to more than the entire market cap of the London stock exchange.

Ahead of such a seismic markets event, and after a nine-week winning streak for the S&P 500, is a correction that unexpected?

Photograph by Michael Nagle/Bloomberg via Getty Images