SpaceX IPO Already Sucking Liquidity Out of Market
US stocks fell sharply on Friday, with tech leading the way down after May's jobs report blew past expectations, while a rotation out of tech stocks and chipmakers continued.
The Dow Jones Industrial Average (^DJI) fell 1.3%. The benchmark S&P 500 (^GSPC) sank 2.6%, while the tech-heavy Nasdaq Composite (^IXIC) plunged by over 4.1%, with shares of Nvidia (NVDA) falling 6%.
The May jobs report far exceeded expectations, with US employers adding 172,000 jobs last month, well above economists' expectations of around 88,000. The unemployment rate held steady at 4.3%.
But the strong report also fueled bets on a Federal Reserve rate hike at some point this year, as the labor market stabilizes amid high inflation. Traders are now fully pricing in a rate hike from the central bank by the end of the year, even as President Trump continues to call for cuts as Kevin Warsh, his appointee to chair the Fed, takes the helm.
Meanwhile, the rotation out of chipmakers and tech stocks gathered steam. Broadcom (AVGO) earnings sent shockwaves through the AI trade earlier this week, and shares continued plummeting on Friday. Micron (MU), AMD (AMD), and Intel (INTC) all sank.
The S&P 500 snapped a historic weekly winning streak. The benchmark index fell 2.5% for the week, posting its first weekly decline in 10 weeks.
Elsewhere, the fragile ceasefire between the US and Iran, along with reports of stalled negotiations, continues to fuel uncertainty on Wall Street, even as President Trump assures that talks are in their "final" stages.
Sarah Min, Sean Conlon and Lisa Kailai Han of CNBC also report the Nasdaq falls 4% and suffers its worst day since April 2025 as traders flee chip stocks:
U.S. equities tumbled Friday because of a violent sell-off for chip stocks. The tech-heavy Nasdaq Composite lost 4% for its biggest decline since the tariff turmoil of early 2025.
The catalyst for the chip turn this week was unclear. Some disappointment in Broadcom’s failure to raise its AI chip outlook Wednesday night caused the group to lose ground on Thursday. But Friday’s selling reached a new level of intensity. A spike in Treasury yields following a much stronger-than-expected jobs report for May didn’t help the case.
The Nasdaq lost 4.18% and closed at 25,709.43 for its biggest drop going back to April 2025. The S&P 500 dropped 2.64% and ended at 7,383.74, while the Dow Jones Industrial Average lost 695.15 points, or 1.35%, settling at 50,866.78. The blue-chip index closed at a record Thursday.
The S&P 500 lost more than 2% on the week for its first negative week in 10. The Nasdaq Composite tumbled 4.7% following Friday’s losses. The 30-stock Dow was modestly lower on the week.
The iShares Semiconductor ETF dropped 10% for its worst day since March 2020. Shares in Broadcom were nearly 8% lower after tumbling more than 12% on Thursday. Marvell Technology dropped more than 16% Friday. Intel and Advanced Micro Devices fell around 11%.
Micron Technology, the memory chipmaker that’s been the latest star of the bull market, was down 13% after dropping 8% on Thursday.
“Investors had been kind of hovering with their finger over this sell button,” said Mark Hackett, chief market strategist at Nationwide. “Not necessarily to get out. But if you’ve owned some of these semiconductor names through the last two months, you’re very out of whack with your long term positioning goal. You need to take profits at some point.”
In another sign of speculation coming out of the market, bitcoin tumbled below $60,000 for the first time since late 2024.
The iShares Semiconductor ETF is still up 79% on the year even after the recent declines.
This rout comes as tech investors get ready for the largest IPO ever in SpaceX next week. Already set to go public at a valuation of $1.77 trillion, Elon Musk’s space and AI venture has boosted enthusiasm for the sector, while also stoking concern among some that its debut could mark some kind of top in what they think is an investing bubble. Others believe part of this chip and bitcoin decline is investors making room in their portfolio for the IPO.
“People looking to get into the SpaceX IPO next week, it’s unlikely they’re going to use Procter & Gamble funds to fund it,” said Nationwide’s Hackett. “It’s going to be some of these AI trades, the semis, the momentum names, or at least tech in general. ... Once the boulder starts rolling down the hill, like we saw yesterday, you can see fairly disorderly sell-offs.”
Friday’s tech drop came after the Bureau of Labor Statistics reported that nonfarm payrolls increased by 172,000 in May, well above the 80,000 jobs that economists polled by Dow Jones had expected to be added. The 10-year yield jumped above 4.5%, while the 30-year yield advanced above 5%, key levels that revived concerns about a slowing economy and raising borrowing costs for companies helping to fuel the AI buildout.
Investors rotated into healthcare and staples stocks on Friday as they dumped tech shares. Colgate-Palmolive added 4%, and Coca-Cola was up more than 3%. Johnson & Johnson was up 2%.
We ended the week with a good old-fashioned selloff in the hottest sector, semiconductor stocks.
You can add photonics, Dell, and other hot stocks that ran up a lot since April.
Just look at today's large cap decliners (full list here):
I circled all the semis; basically, stocks that ran up a lot over the last few weeks.
But anything that ran up very hard got clobbered today and the reason is simple.
Hot money is taking profits out of the red-hot AI stocks to raise money for next Friday's much-anticipated SpaceX IPO.
That IPO is expected to be the biggest in history, lots of investors are going to make a lot of money, especially those that got in early, like Ontario Teachers' Pension Plan , which is looking at an $11 billion windfall (kudos to Olivia Steedman and her team).
The liquidity effects of the SpaceX IPO are already being felt.
Importantly, today's selloff in chips stocks/ photonics/ Dell and other hot stocks is nothing more than elite hedge funds preparing for next week's SpaceX IPO.
It has nothing to do with the hot jobs report, rates and potential Fed rate hikes but macro strategists will convince you it's all about that (it isn't).
By the way, even with today's vicious selloff in chip stocks, Marvell Technology (MRVL) still posted the best performance among large cap stocks this week (full list here):
That stock was down 15% today, but bounced a bit after the close when it was announced it will join the S&P 500.
Still, unless you're an expert trader who knows how to look at hourly, daily, weekly charts, be careful trying to trade these high-flyers; they're extremely volatile (look at Navitas Semiconductor this week).
For example, a quick look at Marvell's daily chart tells me the stock can still decline a lot more despite today's big drop:
It doesn't mean it will, it means if you chase performance of parabolic moves, you risk being burned if you don't know how to manage risk (the algos are always ten steps ahead of you in terms of short-term moves).
Anyway, be careful as these big IPOs hit the market (OpenAI and Anthropic are next) because they will be sucking liquidity out of red-hot tech shares, at least initially.
Below, CNBC Mad Money host Jim Cramer weighs in on the latest news on the upcoming SpaceX IPO and how tech companies are racing to raise funds (I agree with him here).
Next, Fundstrat's Tom Lee joins 'Closing Bell' to talk what is dragging the market lower into the end of the week.
Third, Ed Yardeni, Yardeni Research president, joins 'Power Lunch' to discuss the equity market selloff, analogs to past market rallies and much more.
Fourth, Bridgewater Associates Founder Ray Dalio says the debt burden has passed a "point of no return." He speaks with Bloomberg's Dani Burger at the Forbes Iconoclast Summit in New York City about the bond market, a weaker dollar driving gold demand, and AI bubble concerns.
Lastly, Jeremy Grantham’s investment firm GMO made its name betting against the mania of the late 1990s and the mid-2000s housing boom. In this episode of The Big View, he tells Peter Thal Larsen how artificial intelligence has forced Big Tech firms into a fight to the death.
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