Tech Sector Stumbles as AI Investment Costs Spark Sell-Off

The Nasdaq 100 concluded the trading week on a decidedly negative note, with a broad sell-off erasing the gains achieved earlier in the period. Rather than extending its record-breaking run, the index was pressured by mounting investor apprehension over the soaring capital expenditures required to fund artificial intelligence infrastructure. Disappointing signals from the semiconductor and software industries triggered the wave of selling.

Adding pressure to the tech-heavy benchmark were comments from the Federal Reserve Bank of Cleveland, which tempered market expectations for rapid interest rate cuts in 2026. This pushed yields on the 10-year U.S. Treasury note slightly higher, prompting a classic sector rotation. Capital flowed out of growth-oriented technology stocks and sought safer ground in more defensive areas, such as consumer staples.

Despite the sector-wide weakness, a few individual equities managed to post gains. Lululemon Athletica defied the negative trend, surging nearly 10% after the company raised its full-year guidance. Tesla also demonstrated relative strength, climbing 2.6% as renewed optimism surrounding its autonomous driving software provided a lift.

Capex Concerns Take Center Stage

The core driver of Friday's decline was a renewed focus on capital expenditure (capex) within the technology sector. Investors are growing increasingly skeptical about whether the billions being poured into AI infrastructure will generate profitable returns quickly enough. This sentiment hit several industry leaders hard.

Should investors sell immediately? Or is it worth buying NASDAQ 100?

Broadcom became a focal point of these concerns. Despite reporting solid quarterly figures, its shares plunged over 11%. The downturn was triggered by a sales outlook for AI chips that fell short of the market's elevated expectations, coupled with management commentary warning of impending margin pressure.

A similar pattern emerged with Oracle. The company's stock dropped approximately 4.5% after it reported soaring investment costs of $12 billion, while its revenue slightly missed analyst targets. Market observers interpreted this reaction as a clear sign that investors are currently sensitive to high spending that isn't immediately accompanied by accelerated earnings growth. The wave of uncertainty also dragged down other sector giants like Nvidia and AMD, which traded lower in sympathy.

Technical Breakdown and Market Sentiment

From a technical perspective, the index's close at 25,201.63 points—representing a daily loss of 1.85%—signaled a breakdown below a key support level at 25,500. Attention now turns to whether semiconductor stocks can find stability. Analysts note that if the selling pressure persists, the next significant support zone around 24,850 points will come into view. The recent increase in demand for put options indicates that institutional investors are already moving to hedge against potential further volatility in the sessions ahead.