STORY: Wall Street’s major indexes closed lower on Friday, with the Dow losing half a percent, the S&P 500 shedding 1% and the tech-heavy Nasdaq plunging 1.7%.Shares of Broadcom tumbled after the chipmaker warned of slimmer future margins, causing renewed concerns about the profitability of surging AI investments.This was after a nearly 11% sell-off in Oracle on Thursday following the cloud software company’s weak financial forecast.Oracle shares added to losses on Friday even after it denied a Bloomberg report that its data centers for ChatGPT maker OpenAI were being delayed.Ross Mayfield is investment strategist at Baird Private Wealth Management.”The end of this week has featured a couple of days in a row of AI anxiety – Oracle’s report followed by Broadcom’s report – and just a renewal of the skepticism and that we’ve seen a lot over the last couple of months around the viability, the profitability, the return on investment from the AI build-out – the hundreds of billions that are going into infrastructure – and we’re seeing it play out in different ways, whether it’s profitability metrics or questionable guidance. But ultimately this is a problem with concentration at the top of the market, a few big stocks can bring the whole thing down. But the rotation under the surface has been pretty, I think, resilient. We’ve seen a lot of strength from other sectors. And, ultimately, I’m honestly pretty excited about this because I think that this sort of skepticism and hole poking in the AI trade is not something that happens in bubbles, in asset bubbles – there’s a skepticism that I think is healthy and a rotation that is healthy as well.”Along with Broadcom, heavyweight AI leader Nvidia was a major drag on the S&P 500, with shares losing more than 3%.Other AI-related stock drops included SanDisk, which plunged more than 14.5%, CoreWeave, down 10% and nuclear technology firm Oklo, which lost more than 15%.Meanwhile, Treasury yields rose, also pressuring stocks, after a group of Federal Reserve officials who voted against the central bank’s interest rate cut this week voiced worries that inflation remains too high to warrant lower borrowing costs.The Labor Department’s reports on nonfarm payrolls, consumer inflation and retail sales data are due next week and may offer greater insight into the health of the economy.
