Why Oracle, Arm, and Other AI, Chip Stocks Fell on Friday

Published Date : 11/01/2025 

Nvidia, AMD stocks fall as new Biden export rules weigh on the sector. The market ended the week on a somber note as the economy and new restrictions on advanced semiconductors used for AI sent a ripple through the industry. 

The market closed on a somber note as the economy took center stage.

Investors were absorbing a surprisingly robust jobs report, which highlighted the Federal Reserve's ongoing struggle with inflation and the potential for future interest rate cuts.

To make matters worse, a decision by the Biden administration regarding advanced semiconductors used for artificial intelligence (AI) caused a ripple effect in the semiconductor industry.

With this backdrop, database and AI chipmaker Oracle (NYSE ORCL) dropped 4.4%, chip architect Arm Holdings (NASDAQ ARM) tumbled 3.4%, and semiconductor specialist Broadcom (NASDAQ AVGO) fell 2.8% as of 1 10 p.m.

ET on Friday.

A thorough check of financial reports, regulatory filings, and changes to analysts' price targets revealed no company-specific news to explain the decline.

This suggests that the broader economic and industry developments were the primary factors.

The monthly jobs report, courtesy of the U.S.

Bureau of Labor Statistics, showed that total nonfarm payrolls increased by 256,000 on a seasonally adjusted basis during the month of December, far outpacing economists' forecasts of 153,000.

While a strong job market is generally positive, it has kept inflation elevated, making it challenging for the Fed to lower interest rates.

Wall Street and Main Street are eager for rates to come down, but the current data suggests that the Fed is unlikely to cut rates any further until inflation is under control.

Fed officials are scheduled to meet later this month to discuss these issues, but the chances of a rate cut are slim, with the likelihood now standing at just 2.7%, according to the CME FedWatch tool.

The semiconductor industry faced further challenges as the Biden administration is set to introduce another wave of export restrictions related to high-performance and AI-centric processors.

These restrictions are aimed at keeping advanced technology away from U.S.

adversaries, including China and Russia.

This plan involves a three-tiered system that would allow sales of these chips to U.S.

allies, while sales to many other countries would be strictly regulated.

Countries in the final tier would be ineligible to buy these advanced processors at all.

This will mark the third round of such restrictions, designed to prevent third-party countries from acting as intermediaries and bypassing U.S.

export restrictions.

For Oracle, Arm, and Broadcom, these new regulations could have significant implications for their global business strategies and revenue streams.

The uncertainty surrounding these changes has likely contributed to the recent stock drops.

Investors are now closely watching for any further developments that could affect the semiconductor industry's future. 

Frequently Asked Questions (FAQS):

Q: What caused the drop in Oracle, Arm, and Broadcom stocks on Friday?

A: The stocks of Oracle, Arm, and Broadcom dropped on Friday due to a combination of a robust jobs report, which highlighted ongoing inflation concerns, and new export restrictions on advanced semiconductors and AI chips announced by the Biden administration.

Q: What is the impact of the new export restrictions on the semiconductor industry?

A: The new export restrictions on advanced semiconductors and AI chips, aimed at keeping technology away from U.S. adversaries, could significantly affect the global business strategies and revenue streams of companies like Oracle, Arm, and Broadcom.

Q: How does the jobs report affect the Federal Reserve's interest rate decisions?

A: A strong jobs report, while generally positive, has kept inflation elevated, making it challenging for the Federal Reserve to lower interest rates. The Fed is unlikely to cut rates until inflation is under control.

Q: What is the three-tiered system for semiconductor export restrictions?

A: The three-tiered system for semiconductor export restrictions allows sales of advanced chips to U.S. allies, strictly regulates sales to many other countries, and makes sales to certain countries, including U.S. adversaries, completely ineligible.

Q: Why are investors closely watching the semiconductor industry?

A: Investors are closely watching the semiconductor industry due to the potential impact of new export restrictions and economic factors on companies' global business strategies and financial performance. 

More Related Topics :