Traders Dump Chipmakers as Rising Yields Drive US Stock Selloff

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(Bloomberg) — Rising bond yields curbed Wall Street’s appetite for risky bets Friday, prompting traders to dump chipmakers and other high-flying technology shares following a weeks-long, record-setting rally driven by a rush of cash into all things artificial intelligence.

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The S&P 500 Index fell 1% as of 9:54 a.m. in New York, while the Nasdaq 100 Index tumbled 1.4%. Shares of semiconductor companies slid, leading the broad-based decline in equity markets in the second example of a sharp reversal in momentum this week.

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The Philadelphia Stock Exchange Semiconductor Index fell 3.4%. Among notable decliners, Nvidia Corp. fell 3.7%, Intel Corp. shed 6.2%, and Broadcom Inc. lost 2.8%. Year-to-date strength in semiconductors make chipmakers a natural place for cautious investors to take profits.

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Friday’s rout came as investors around the globe offloaded government bonds, sending borrowing costs higher from Japan to the US after a series of hot inflation prints stoked concern about the prospect of central banks having to raise interest rates this year. The yield on 10-year Treasuries climbed around nine basis points to 4.57%.

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“This week’s inflation numbers and the renewed rise in crude oil is raising fears about inflation,” said Matt Maley, chief market strategist at Miller Tabak + Co. “With long-term yields hitting 12-month highs, it’s causing investors to take some chips off the table in the stock market after the enormous six week run.”

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The selloff is unsurprising to some on Wall Street. Bank of America Corp. strategists led by Michael Hartnett said the stock market is primed for profit-taking in early June due to investors crowding into equities and rising inflation risks. Growing price pressures are beginning to permeate the US economy at a time when the market is soaring to fresh record highs, he said in a note to clients.

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“Bull capitulation into stocks and tech likely fully complete in next few weeks, early June ripe for taking some off table,” Hartnett wrote.

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A similar view was echoed at Barclays Plc, where the in-house market-timing indicator is flashing a sell signal for the S&P 500 — the first such event since February 2025.

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“Tops can be difficult to time,” said the firm’s global head of equities tactical strategies Alexander Altmann in a note to clients early Friday, “but enough of the team’s signals are now flashing that we want to neutralise our bullish risk view and turn more cautious near term.”

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The selloff is compounding an already difficult environment for stock pickers. Active managers who briefly looked like they might finally have their moment earlier this year are once again confronting a familiar problem: a market rally driven by a tiny group of tech megacaps that diversified portfolios simply can’t keep up with.

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The share of mutual funds outperforming the S&P 500 this year has plunged to just 28%, according to the latest data from Barclays, down from over 60% at the end of February. After benefiting from a rotation out of tech shares and into the broader market, stock pickers are getting left behind as money floods back into a narrow group of AI-fueled heavyweights.