The S&P 500 fell on Friday as investors reduced exposure to semiconductor stocks. The index dropped 0.6%, while the NASDAQ Composite lost 1%. The Dow Jones Industrial Average traded near the flatline.
Wall Street also faced pressure from Netflix, higher oil prices, and fighting between the United States and Iran. The major indexes moved toward weekly losses after a reversal in stocks linked to artificial intelligence spending.
Chip Stocks Extend Weekly Selloff
Semiconductor shares led the decline. NVIDIA, Advanced Micro Devices, Applied Materials, Lam Research, Intel, and KLA traded lower. The Philadelphia Semiconductor Index fell close to 2% and moved deeper into bear-market territory from its late-June peak.
The index has lost about 11% this week and nearly 24% from its record high. Investors took profits after a three-month rally that lifted the chip gauge more than 100%. The VanEck Semiconductor ETF headed for its third weekly loss in four weeks.
Fresh doubts over AI spending added pressure. Chinese startup Moonshot AI introduced Kimi K3, a large open-weight model that it says can compete with leading US systems. The launch raised questions over whether costly AI infrastructure plans will deliver the returns investors expect.
Strategists at BBH said investors are ‘increasingly questioning the sustainability of the ongoing AI capital expenditure boom.’ Barclays took a less cautious view and said the pullback could create ‘more attractive entry points’ for long-term investors.
Netflix Drops as Forecast Disappoints
Netflix shares fell about 9% after its third-quarter forecast came in below Wall Street estimates. The decline weighed on the communication services sector and made Netflix one of the largest S&P 500 losers.
Intuitive Surgical also dropped more than 11%. The medical device company kept its procedure-growth forecast unchanged and warned that insurance changes may delay care for some patients.
Meanwhile, Apple shares edged higher while NVIDIA fell, allowing Apple to move ahead of the latter as the most valuable US company. NVIDIA had held the top position since late June last year.
Meanwhile, the CBOE Volatility Index rose above 18, its highest level in more than a week. Declining stocks outnumbered gainers on both the New York Stock Exchange and the NASDAQ.
Oil and Inflation Risks Return
Oil prices rose as fighting between the United States and Iran widened across the Middle East. West Texas Intermediate traded above $81 per barrel, while Brent crude moved above $86.
Kuwait said Iran attacked a power and water desalination plant. US Central Command said it completed a sixth straight night of strikes on Iranian military targets. Iran later claimed attacks on US forces in Syria and Bahrain.
The conflict disrupted energy flows through the Strait of Hormuz, a route that handles about one-fifth of global oil traffic. Higher oil prices renewed concerns over inflation and future Federal Reserve policy.
Cleveland Fed President Beth Hammack said business leaders are asking whether the central bank should act against inflation. She wrote that companies face pressure from energy, insurance, supply chains, and AI data center construction. Hammack added that ‘persistently high inflation is the bigger concern.’
Consumer sentiment improved to 54.4, while one-year inflation expectations fell to 4.2%. Still, survey director Joanne Hsu said the rise may be hard to sustain if gas prices increase again.
With semiconductor stocks under pressure, earnings disappointments weighing on sentiment, and geopolitical risks driving oil higher, investors remain focused on the outlook for inflation and Federal Reserve policy.
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