---
title: "Don't Blame the Non-Farm Employment Data for the Tech Stock Decline"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/289011593.md"
description: "The sharp plunge in US tech stocks was not primarily driven by the Non-Farm Employment data. Analysis points to tensions involving Iran, high inflation expectations, and elevated US Treasury yields as the core pressures. Furthermore, part of the May employment growth stemmed from one-off World Cup-related demand, suggesting the Federal Reserve should not tighten policy based on this data. The fact that small cap stocks fell less than tech stocks further confirms that non-tech sectors had already been under pressure, highlighting significant market divergence"
datetime: "2026-06-08T06:38:27.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/289011593.md)
  - [en](https://longbridge.com/en/news/289011593.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/289011593.md)
---

# Don't Blame the Non-Farm Employment Data for the Tech Stock Decline

Last Friday, the 5th, US stocks plummeted. The Nasdaq Composite sank more than 4%, marking its largest single-day drop in over a year. Nvidia lost over RMB 2.2 trillion in market capitalization overnight.

Subsequent analyses flooded in. The logic went: May Non-Farm Employment data vastly exceeded expectations → Fed rate hike expectations rose → Tech stocks faced sell-offs.

This logical chain does not hold up to scrutiny.

## Non-Farm Data Was at Most One of Several Catalysts for the Decline

**Let's look at the data itself.** Non-farm payrolls increased by approximately 172,000 in May, higher than market expectations. Indeed, the employment data was strong, and the bond market and US dollar reacted as expected—interest rates edged higher, with the 10-Year Treasury Yield rising to 4.54%, an increase of about 6 basis points. The US Dollar Index strengthened slightly, rising from 99.2 to 99.7. Yet, the Nasdaq fell by 4%.

In late April and early May of this year, the 10-Year Treasury Yield surged by 24 basis points in a single week. At that time, inflation concerns troubled the stock market, but tech stocks quickly rebounded and continued their upward trajectory. **Why did the Nasdaq fall so sharply this time?**

Moreover, on that same Friday, the Russell 2000 small cap stock index fell by 3.47%, a smaller decline compared to the Nasdaq. **Given the same Non-Farm data and the same rate hike expectations, if the logic of "Non-Farm → Rate Hikes → Stock Market Drop" held true, why did small cap stocks, which are more sensitive to economic fundamentals and interest rates, fall less than tech stocks?**

**Additionally, there is controversy surrounding the Non-Farm Employment data.** Some economists point out that the surprisingly strong May employment figures likely included a significant portion attributable to the "World Cup effect." With the tournament kicking off in the US on June 11, the leisure and hospitality sector added over 70,000 jobs in a single month, and local government employment in infrastructure and security also saw substantial increases, closely matching the characteristics of pre-event hiring for the World Cup. If these jobs represent one-off event-driven demand, the Federal Reserve neither would nor should use them as a basis for tightening monetary policy.

## Stocks Outside the Tech Sector Had Already Been Falling

**The situation involving Iran remains unresolved, and navigation through the Strait of Hormuz is effectively blocked.** Inflation expectations have long impacted the entire stock market. US Treasury yields have remained at relatively high levels.

Over the past two to three months, the trends in global major asset classes have diverged clearly:

AI-related tech stocks: Rose independently, with Nvidia briefly hitting record highs;

All other sectors: Non-tech US stocks, Hong Kong stocks, and A-share stocks excluding AI targets had already quietly weakened.

**In this macro environment, the AI sector has been holding the line alone, supported by consistently better-than-expected earnings forecasts.** Other sectors have been bearing the heavy burden of high interest rates for over a month. Due to the lack of key hardware targets in the AI industry, the Hang Seng Tech Index in Hong Kong has continuously underperformed neighboring markets in Japan and South Korea.

In the A-share market, when the Shanghai Composite Index exceeded 4,000 points, 1,700 stocks—equivalent to one-third of all listed stocks—were still trading below their prices on September 24, 2024. Public mutual fund products without exposure to semiconductors and optical communications have delivered lackluster performance this year, significantly lagging behind the broader market.

Investors without holdings in AI tech stocks have been silently enduring the impact of inflation expectations for two months!

Note: Industry weights are based on 2025 annual fund holding reports

## The Tech Stock Correction Is a Liquidity Issue

**So, what exactly was last Friday's correction?**

Several factors converged. Individually, none were significant, but together they were sufficient to trigger a concentrated release of pressure in highly valued, overcrowded tech stocks:

**First, valuation disparities are widening.** After nearly a year of gains, the dynamic P/E ratios of the tech sector are at relatively high levels, leaving little room for "expectation gaps." In particular, non-AI industrial sectors have been falling for over a month under the impact of inflation expectations, causing the valuation gap between the AI sector and other sectors to widen further.

**Second, leveraged trading has made investments extremely crowded.** AI-related targets have been the most concentrated long positions for global institutions over the past six months. Crowded trades contain substantial leveraged capital; once there is any disturbance, forced liquidation of leveraged positions can amplify declines through panic selling.

**These factors are all liquidity issues, unrelated to the demand prospects of the AI industry.**

## Some Concerns Specific to AI Technology Companies

Compared to SpaceX's massive IPO next week, the market is more concerned about Meta's financing.

On Friday, Meta announced plans to sell billions of dollars in new shares, causing its stock price to drop 7%. Just days earlier, Alphabet had completed an $80 billion financing round. The frequent secondary offerings by tech giants appear superficially to be "replenishing ammunition to support AI capital expenditures," but viewed from another angle, this indicates that their capital expenditure pressure has become so great that they need to dilute equity to maintain it—this in itself is a signal worth pondering and directly pressures secondary market holders.

Additionally, after hours on Wednesday, Broadcom released its quarterly report. AI chip revenue grew 143% quarter-over-quarter, and total revenue increased 48% year-over-year, with all figures hitting record highs. Yet, the stock price plummeted more than 12% in after-hours trading.

**The issues lie in two points:** First, the guidance for the AI chip business merely maintained high expectations without further upward revision; second, CEO Hock Tan revealed during the conference call that Google might introduce multiple chip suppliers, no longer relying exclusively on Broadcom, and that the company would abandon its previously planned complete AI system, transitioning to a "chips-only" model.

Some analysts pointed out that **the market's pricing of AI stocks does not allow for any moments of "standing still." No matter how good the earnings, if the guidance does not exceed expectations, it is considered negative news.** This standard is so harsh it is almost unsustainable. Against this backdrop, the release of the Non-Farm data on Friday was merely adding insult to injury in an already wounded market.

## The Fundamentals of the AI Industry Have Not Undergone a Substantial Turning Point

Look at Nvidia's latest quarterly report: Revenue increased 85% year-over-year, data center business quarterly revenue exceeded $75 billion, marking the 14th consecutive quarter of sequential growth, with the midpoint of next quarter's guidance at $91 billion, indicating further acceleration in growth. This is not the performance sheet of a company whose demand has peaked.

More importantly, the accelerated implementation of AI Agents is driving computing power demand from the "infrastructure construction phase" toward the "scaled application phase." This means that demand on the hardware side is not contracting but accelerating its expansion.

Of course, market concerns are not entirely unfounded. Free cash flow among top cloud computing providers has shown volatility, customer concentration in data centers is high, and the controversy of "being able to afford chips but unable to earn back the money" persists. These are variables worth tracking continuously, but they have not yet formed evidence of deteriorating fundamentals.

**To summarize the current state of the AI industry in one sentence: Apart from being expensive, there are currently no other flaws.**

## How to View the Situation After This Correction?

Since the root of the correction is liquidity rather than industrial fundamentals, the framework for thinking should be adjusted accordingly.

**The logic for selling and exiting requires establishing a premise:** That demand in the AI industry is lower than expected, or that macro liquidity is undergoing systematic tightening. The former currently lacks sufficient data support, while the latter depends on the evolution path of inflation and interest rates.

**The logic for buying on dips is built on another premise:** That the industrial trend remains unchanged, and the current correction is merely a rebalancing of positions and capital, not a reversal of the trend.

**I tend to believe that before there is a major setback in the fundamentals of the AI industry, this round of tech stock adjustments is unlikely to be the cycle peak. I think it is possible to buy the dip in AI tech stocks.**

**But here lies a more difficult question worth leaving for each investor to consider:** Can we truly identify a "major fundamental setback" before it occurs?

Looking back at the internet bubble of 1999, warning signals seem obvious in hindsight—most companies were unprofitable, business models relied on continuous financing, and valuation systems were completely detached from reality. But at the time, these signals were absorbed by a new narrative framework: "This is the new economy; old frameworks do not apply." It was not that the data wasn't weak, but that the market actively modified the framework for interpreting the data.

Of course, today's AI differs substantially from the internet of those years: Nvidia's valuation is not supported by narrative alone; it is backed by quarterly revenue growth of 85% and realized profits. This is not the same type of asset as Pets.com was back then.

**But the logic of the narrative framework still applies.** The turning point signal truly worth guarding against is not a specific piece of data worsening, but the loosening of the narrative framework used by the market to explain negative signals. The day when "AI capital expenditures are unsustainable" shifts from a minority view to the mainstream narrative is more worthy of attention than any quarterly report data.

**Currently, there are no signs that this framework is loosening.** Cloud providers' procurement is still accelerating, and the application of AI Agents is still expanding. Volatility will continue, but the direction depends more on whether the industry itself can continue to meet expectations, rather than what the next Non-Farm Employment figure will be.

**So the real difficulty is whether we can distinguish the turning point event.** If we cannot, we should return to the perspective of protecting our investment portfolios and adopt appropriate strategies in our investment approach. Please refer to the previous official account article "I Don't Look at AI Company Valuations."

Risk Warning and Disclaimer

The market involves risks, and investment requires caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial status, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment based on this content is at the user's own risk.

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