Wall Street experienced a significant sell-off, primarily driven by concerns surrounding AI-related chip stocks. All three major US stock indexes closed lower for the day and the week. The S&P 500 fell 76.08 points to 7,457.69, the Dow Jones Industrial Average dropped 406.55 points to 52,146.42, and the Nasdaq Composite sank 361.70 points to 25,520.24. The Philadelphia SE Semiconductor Index logged its steepest weekly loss in over a year and has tumbled over 18% so far in July, confirming a bear market entry on June 22, despite still being up nearly 65% year-to-date.
Chip stocks and other AI beneficiaries have been under pressure for weeks amid worries that their prices had climbed too high and that the intense demand for computer processors might be unsustainable, potentially leading to lower-than-promised profits and productivity from AI. Nvidia, a major player, fell 2.2%, briefly ceding its position as the most valuable company before recovering. Other chipmakers like Applied Materials sank 5.6%, and Micron Technology ended down 0.5% after volatile trading. Taiwan Semiconductor Manufacturing Co. dropped 7.3% in overseas trading, contributing to wider tech sell-offs in Asia.
The sell-off broadened beyond chipmakers as the session progressed, with Meta and Alphabet suffering declines of 2.7% and 3.2%, respectively. Netflix tumbled 7.3% after a weaker-than-expected earnings forecast, and Uber Technologies dropped 2.1%. Amidst the tech downturn, oil prices jumped, with Brent crude rising 4.6% to settle at $88.10 a barrel, up from approximately $76 a week prior. This surge in oil prices led to gains in energy stocks, which were the sole advancing sector in the S&P 500, and also pushed Treasury yields higher, threatening to slow the economy and impact stock prices.
