Wall Street's main indexes fell on Friday as a deepening selloff in chip stocks pushed investors to reassess this year's AI-fueled rally. A weak forecast from Netflix and fresh U.S.-Iran hostilities added to the pressure, leaving the major indexes on course for a losing week.
U.S. stock index futures slid on Friday as the selloff in semiconductor stocks deepened, forcing investors to reassess the staying power of this year's AI-fueled rally. In premarket trading, Dow E-minis fell 352 points, or 0.67%, S&P 500 E-minis dropped 1.03% and Nasdaq 100 E-minis lost 2.05%. The weakness carried into the open.
When regular trading began, the S&P 500 lost 1.2%, the Dow slipped 519 points, or 1%, and the Nasdaq Composite dropped 1.8%.
Chip stocks lead the retreat
Semiconductors drove the decline for a second straight day. Memory-chip makers SanDisk, Western Digital, Seagate Technology and Micron Technology fell between 4.6% and 6.5% before the bell. The Philadelphia SE Semiconductor index hit a nearly two-month low on Thursday and was set for its worst week since March 2025.
The move reflected renewed worries over the scale of AI spending. According to CNBC, BBH strategists said investors are "increasingly questioning the sustainability of the ongoing AI capital expenditure boom".
Netflix and other laggards weigh
Netflix added to the pressure. Its shares fell 9.4% after the company forecast third-quarter revenue and earnings below Wall Street expectations. Intuitive Surgical fell 10.8%, even after topping estimates for second-quarter profit and revenue.
Trading was choppy through the session. The turbulence lifted Wall Street's fear gauge. The CBOE Volatility Index rose 1.8 points to 18.53, a more-than-one-week high. The Philadelphia Semiconductor Index was down 1.4% after falling 5.7% earlier in the session.
Geopolitics adds to caution
Middle East tensions compounded the unease. Iran said it had launched fresh attacks on U.S. facilities in the Gulf after a sixth straight night of U.S. strikes on Iranian military targets. The escalation revived worries over energy flows through the Strait of Hormuz, with U.S. West Texas Intermediate crude trading above $81 a barrel and Brent above $86.
The pullback came even after an upbeat start to earnings season and benign inflation data earlier in the week. The main indexes were still on track for weekly declines.
Sources: Reuters, CNBC, Barron's (snippet-based)
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