US STOCKS-Wall Street ends lower; fears of AI bubble and inflation send investors away

By Sinéad Carew and Johann M Cherian

Dec 12 (Reuters) - The S&P 500 and the Nasdaq closed down more than 1% on Friday with investors leaving technology for other sectors as Broadcom and Oracle fueled concerns about an AI bubble and rising U.S. Treasury yields added pressure after some policymakers spoke out against easing monetary policy.

Treasury yields rose 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.

Broadcom AVGO.O shares tumbled 11.4% after the chipmaker warned of slimmer future margins, causing renewed concerns about the profitability of surging AI investments.

Oracle ORCL.N fell 4.5% on top of Thursday's almost 11% plunge following the cloud software company's weak financial forecast. Oracle shares were under pressure on Friday even after it denied a Bloomberg report that its data centers for ChatGPT maker OpenAI were being delayed.

It didn't help that the S&P 500 and the Dow had notched record closing highs on Thursday and that investors were looking ahead to important labor market and inflation data due out in the week ahead, according to Anthony Saglimbene, chief market strategist at Ameriprise.

"It's not surprising that the market's selling off today after a pretty solid couple weeks," said Saglimbene, adding that following record closes, and with "some disruption in the AI theme right now, investors today are looking at some of the more defensive sectors."

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 economy's health after the October government shutdown starved investors and policymakers of official data releases.

"The market is probably a little bit cautious on heading into those big numbers next week," said the strategist.

The Nasdaq Composite .IXIC lost 398.69 points, or 1.69%, to 23,195.17 while the S&P 500 .SPX lost 73.59 points, or 1.07%, to 6,827.41. For the week, the S&P 500 fell 0.63% while the Nasdaq declined 1.62%.

The Dow Jones Industrial Average .DJI fell 245.96 points, or 0.51% on the day to 48,458.05 but managed to show a weekly gain of 1.05%.

Broadcom was the biggest drag on the S&P 500 on the day and heavyweight AI chip leader Nvidia NVDA.O, down 3.3%, was the next biggest weight. In sympathy, every stock in the Philadelphia semiconductor index .SOX lost ground with the index sinking 5.1%, for its weakest session since October 10.

Other companies that have benefited from AI bets but went into reverse on Friday included SanDisk SNDK.O, which fell 14.7% and was the S&P 500's biggest percentage decliner. Investors also fled AI infrastructure companies with CoreWeave CRW.O off 10.1% and Oklo OKLO.N, losing 15.1%.

Six of the 11 S&P 500 industry sectors closed lower, led by heavyweight tech stocks .SPLRCT, which dropped 2.9% for its deepest daily loss since October 10. Defensive consumer staples .SPLRCS led the advancers with a 0.9% gain.

Also on the bright side, Lululemon Athletica shares rallied 9.6% after the apparel maker raised its annual profit forecast and said that CEO Calvin McDonald was leaving the company.

But Costco Wholesale shares ended the day virtually unchanged even after it beat Wall Street estimates for first-quarter revenue and profit as consumers snapped up affordable essentials and nice-to-have items at its stores ahead of the crucial holiday season.

Declining issues outnumbered advancers by a 2.23-to-1 ratio on the NYSE. On the Nasdaq, 1,419 stocks rose and 3,315 fell as declining issues outnumbered advancers by a 2.34-to-1 ratio.

The S&P 500 posted 32 new 52-week highs and 5 new lows while the Nasdaq Composite recorded 136 new highs and 98 new lows.

On U.S. exchanges, 18.08 billion shares changed hands compared with the 17.25 billion average for the last 20 sessions.