Nvidia stock (NVDA) sank as much as 5% on Friday as the semiconductor sector led a market sell-off in the final trading session of a volatile first week of September.

Technology (XLK) stocks led the markets lower on Friday after the unemployment rate fell to 4.2% in August from 4.3% in July, prompting analysts to believe the Federal Reserve will cut rates by 25 basis points instead of 50 basis points at its policy meeting later this month.

Tech, which is normally a beneficiary of an interest rate cutting cycle, sold off following the August employment data.

Investors have increasingly been questioning if capital expenditures for tech infrastructure will continue and whether the AI stock boom has peaked.

"They're [investors] not going to get the support they were looking for from the Fed, and there's still remaining questions about where the spending is going, and the economy is okay, but not great," Peter Tchir, head of Macro Strategy at Academy Securities told Yahoo Finance.

Nvidia's stellar growth streak this year has underpinned the market's performance. The stock led a sharp market rebound last month, but failed to continue the rally in late August following a lackluster reception to the company's quarterly results.

Nvidia is on pace to end the shortened trading week down roughly 14%.

Shares of Broadcom (AVGO) also sank nearly 9% after the semiconductor giant's lackluster sales forecast for the fourth quarter overshadowed its earnings beat.

Orders for the company's AI chips surged, while spending on broadband lagged.

"Clearly, the Street wasn't happy. They were looking for some sort of outsized number... But this is a little more of a story about the diversification of the business as well," the Futurum Group CEO Daniel Newman told Yahoo Finance on Friday.

"The core business has slowed a little bit, but has some favorable conditions to rotate back over these next few quarters." he added.

ASML (ASML) shares also fell 5% on Friday after the Dutch government announced increased export controls on advanced chip manufacturing equipment, citing national security concerns.

Morgan Stanley also removed the company as a "Top Pick" for European semiconductors and slightly lowered its price target.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.