Written by: Tide Research

On Thursday, Wall Street staged the most dramatic scene of 2026.

The Dow Jones Industrial Average soared 875 points (+1.73%) to close at 51,561.93, a historic high. The S&P 500 rose 0.41% to 7,584.31. However, the Nasdaq edged down 0.09% to 26,830.96, making the technology sector (-1.46%) the only one of the 11 S&P sectors to experience a substantial decline. The Russell 2000 rose 1.59% to 2,939.41, with small-cap stocks outperforming large-cap tech stocks for the first time in a while.

This kind of divergence was last seen when the war broke out in early March.

Broadcom crashes 14%: "Settlement Day" for AI chip sector

Broadcom (AVGO) was the catalyst for this rotation.

The Q2 earnings report released the previous day was not bad in itself: AI semiconductor revenue was $10.8 billion (+143%), a record; adjusted EPS was $2.44, surpassing expectations. However, total revenue of $22.187 billion was slightly below the consensus of $22.27 billion, and the revenue for the infrastructure software segment where VMware is located was $7.178 billion, below the expected $7.32 billion. More crucially, management maintained the AI chip business's long-term target of $100 billion, but did not raise it.

For a stock that has already risen 55% this quarter with a PE ratio of 87, these minor "not impressive enough" aspects provided a sufficient reason to sell. Broadcom saw a pre-market drop of up to 15% and closed down about 14%, evaporating over $320 billion in market capitalization.

The ripple effect spread immediately: Qualcomm and AMD each fell about 4%, Marvell and Micron dropped about 7%, and the Philadelphia Semiconductor Index (SOX) fell 2.8% overall. Marvell, which had soared the previous day due to Jensen Huang's endorsement of a "trillion-dollar company," gave back some of its gains in just one day.

CrowdStrike (CRWD) also did not escape, despite its Q1 performance surpassing expectations (EPS $1.10 vs expected $0.88), but rising operating expenses raised concerns, and the stock fell 8.5%. When the market switches to a "sell the news" mode, good news can also be repriced.

Winners of the rotation: Healthcare, finance, and real estate take the baton

Among the 11 S&P 500 sectors, 8 rose and 3 fell, entirely opposite to the previous day.

Healthcare: +3.14%, champion of the day. UnitedHealth (UNH) rose 5.7%, contributing significantly to the Dow's gain. The catalyst was Bank of America's upgrade to a "buy" rating. As a typical defensive sector, healthcare became a natural safe haven for funds during the retreat of AI chips.

Finance: +2.67%. Goldman Sachs (GS) rose 4.7%, being the second-largest contributor to the Dow's increase. The rise in Goldman Sachs had a specific catalyst: SpaceX IPO. As the lead underwriter for this $75 billion deal, Goldman Sachs will earn considerable underwriting fees. JPMorgan Chase (JPM) rose 3%, and American Express (AXP) rose 4.4%.

Real Estate: +1.87%. The yield on the 10-year U.S. Treasury fell 1.4 basis points to 4.477%, and rate-sensitive sectors rebounded accordingly. The 30-year yield also dropped to 4.977%, continuing to hover below the 5% mark.

Technology: -1.8%, weakest of the day. The semiconductor sub-sector was hard hit; Broadcom's crash was too significant, and even Nvidia and Apple failed to pull the tech sector back into positive territory.

Countdown to SpaceX IPO: $75 billion, $1.75 trillion valuation

Another news that ignited market imagination on June 4: SpaceX confirmed it will go public on June 12, aiming to raise $75 billion with a valuation of about $1.75 trillion. If successful, this will be the largest IPO in U.S. history, and SpaceX will directly enter the U.S. top ten by market capitalization.

The investor roadshow starts on the same day. Retail investors can already submit indications of interest (IOI) on Robinhood and SoFi, with a tentative stock price of $135 per share. Goldman Sachs is leading the underwriting.

It is noteworthy that regulators have relaxed index inclusion rule restrictions, meaning SpaceX may quickly be included in major index funds after its listing, potentially resulting in holders of 401(k) retirement accounts unknowingly owning Elon Musk's rocket company.

The scale of the SpaceX IPO is enough to become the pricing anchor for the entire capital market in June. The amount of liquidity it will absorb, and whether it will create an "exclusion effect" on other tech stocks, are the issues the market needs to digest in the coming week.

While SpaceX grabs headlines, Honeywell's quantum computing company Quantinuum also completed its listing on Nasdaq on June 4, opening at $68, a 13% premium over the offering price.

The signal from Quantinuum's listing is more important than the price itself: Quantum computing is moving from the lab to the capital market. Investor interest in the "post-AI" narrative is budding, and this is a clue worth following up on.

Labor market: Initial jobless claims rise to a four-month high

The initial jobless claims released on Thursday were 225,000 (expected 215,000), the highest since February 7. On the eve of the Friday nonfarm data release, this signal adds a crack to the "resilience narrative" of the labor market.

However, one should not overinterpret single-week data. The JOLTS report showed that job vacancies jumped to 7.6 million in April, a near two-year high; the overall pattern of the labor market remains "many openings, few hires," with companies wanting to hire, but the actual pace of action is slowing. The Federal Reserve needs to see more data to determine the direction of interest rate policy.

At 8:30 AM (Eastern) on Friday, the May nonfarm employment report will be released. This is the ultimate judge of all narratives this week.

Tide Perspective

The market on June 4 gave a clear signal: AI chips are not bad, they are just too expensive.

Broadcom's AI semiconductor revenue grew 143% year-on-year, with a free cash flow rate of 46%, which are dream data in any industry. But an 87 PE ratio means all good news has been priced in ahead of time, and even a 0.4% revenue miss can trigger a 14% crash. This illustrates the danger of "pricing to perfection."

Funds have not left the market; they simply changed residences. They moved from semiconductors to healthcare, finance, and real estate. The Dow's 875-point surge to a new high is precisely the receipt for this relocation. UnitedHealth, Goldman Sachs, JPMorgan Chase—names that have hardly played leading roles in the AI narrative for the past three years—proved on June 4 that their value does not need to rely on GPUs.

The question is: Is this rotation a trend lasting several weeks, or a one-day pulse? The answer depends on two things. One is Friday's nonfarm data. If the employment data is strong, expectations for Fed rate hikes may heat up, and the rebound of rate-sensitive sectors (real estate, utilities) could abruptly stop, prompting funds to flow back into tech. The other is the pricing and subscription situation of the SpaceX IPO on June 12; the $75 billion capital demand is itself a huge liquidity extractor.

In the short term, the semiconductor sector needs a "cooling period" to digest valuation bubbles. In the medium term, the fundamentals of AI have not changed; the market has finally begun to realize that there is a valuation gap between good companies and good stocks.

Data sources: CNBC, Yahoo Finance, Reuters, TheStreet, BLS, Schwab

Disclaimer: This article represents the author's views and does not constitute investment advice. The market has risks; investing requires caution.