Wall Street concluded the day and week with losses across all three major US stock indexes, as a significant downturn in AI-related stocks broadened into a wider risk-off sentiment. The Philadelphia SE Semiconductor Index suffered its steepest weekly loss in over a year, tumbling nearly 18% in July, though it still holds an approximately 65% year-to-date gain compared to the S&P 500's nearly 9% increase. This selloff was fueled by investor concerns about the sustainability of the nearly trillion-dollar AI spending boom and the possibility that valuations in semiconductor stocks became overheated.
The S&P 500 fell by 75.99 points, or 1.01%, closing at 7,457.78. The Nasdaq Composite dropped 370.83 points, or 1.40%, to 25,511.12, and the Dow Jones Industrial Average decreased by 394.01 points, or 0.75%, to 52,158.96. Ryan Detrick, chief market strategist at Carson Group, noted that the market is experiencing "chip fatigue," suggesting that semiconductor stocks, which had surged significantly, are now correcting. Similarly, Sam Stovall, chief investment strategist at CFRA Research, compared the chip sector's advance to an army getting "too far ahead of its supply lines" and needing to retreat.
The decline extended beyond just chipmakers, with major AI-related megacaps, including all members of the "Magnificent Seven," seeing dips. Meta and Alphabet were particularly affected, falling 2.7% and 3.2% respectively. Netflix also tumbled after delivering a weaker-than-expected earnings forecast, raising doubts about its content growth momentum. Uber Technologies dropped 1.8% following its announcement to acquire Germany's Delivery Hero for nearly $15 billion, while Intuitive Surgical shares slid 13.1% due to an unchanged procedure-growth forecast and warnings about insurance-plan changes. Only energy stocks among the S&P 500 sectors saw gains, benefiting from rising crude prices amid escalating hostilities in the Iran war.
