The rally crumbled Friday as investors faced higher‑rate fears and shaky AI spend outlook. The Nasdaq fell 4.2%, shedding over 1,100 points—the steepest drop since April 2025. Chip makers that lifted indexes this year plunged, with Micron, Intel and Super Micro each sliding more than 11%. The broader market, packed with a few mega‑cap tech names, proved vulnerable when the rally lost its tailwind.

The sell‑off rippled through related assets; bonds fell, oil and gold slipped, and bitcoin joined the decline. Treasury yields rose as the two‑year note hit 4.16%, its highest close in 16 months, signaling expectations of further Fed tightening. Smaller‑cap stocks weren’t spared, with the Russell 2000 down 3.5%. Energy stocks also slipped, reflecting broader risk aversion.

The PHLX Semiconductor Index erased roughly $1.2 trillion in market value, underscoring how thinly the broader indexes depend on a handful of AI‑linked names. Portfolio manager Tom Hancock of GMO warned that the same concentration that fuels record highs can generate rapid, deep losses. The correction shows diversification is for AI‑heavy portfolios.