Key Takeaways
- S&P 500 and Nasdaq indexes fell on Friday due to concerns over AI-related spending.
- Nvidia's stock declined, pushing Apple ahead in market valuation temporarily.
- Netflix shares dropped significantly after missing Wall Street estimates.
Tech stocks experienced a downturn on Friday as investors reassessed the year’s AI-fueled rally. The S&P 500 and Nasdaq indexes slipped, with chip stocks leading the decline. Nvidia's share price fell by 1.4%, contributing to the broader sell-off in semiconductor-related trades.
The Philadelphia Semiconductor index, which tracks major US semiconductor companies, dropped 1.8% for its worst week since March, having lost over 20% from its late June record high. Fiona Cincotta, senior markets analyst at City Index, commented on the sentiment: 'It does feel very much a chip stock-driven move, just sort of hurting sentiment more broadly.'
Chinese AI startup Moonshot unveiled Kimi K3, a 2.8 trillion-parameter model, raising concerns about competition from open-source models in China. This development added to investors' worries over the scale and effectiveness of AI-related spending by major players like Anthropic and OpenAI.
The tech-heavy Nasdaq Composite hit a three-week low earlier in the session before partially recovering. Netflix's shares fell 9% after the streaming giant forecast third-quarter results below Wall Street estimates, heavily impacting the communication services sector, which declined 2.4%. The CBOE Volatility Index rose to its highest level in over a week at 18.03.
Despite the downturn, some positive economic indicators emerged. U.S. consumer sentiment increased to a five-month high in July, though this may be temporary due to renewed tensions between the United States and Iran, which could raise gasoline prices. Intuitive Surgical's shares dropped nearly 11.4% after the company warned that insurance-plan changes might delay patient care.
The market saw mixed performance with declining issues outnumbering advancers by a significant margin on both the NYSE and Nasdaq. The Dow Jones Industrial Average managed to rise slightly, but overall, the tech sector faced substantial pressure from concerns over AI-related spending and competition in the global market.
It does feel very much a chip stock-driven move, just sort of hurting sentiment more broadly.
Fiona Cincotta, Senior Markets Analyst at City Index
Supposedly, there are some offerings that are rivaling the performance of Anthropic and OpenAI… potentially that is contributing today to some of that weakness that started in Asia.
Angelo Kourkafas, Senior Global Investment Strategist at Edward Jones Investments
