Wall Street ends lower as chip selloff broadens

Wall Street ended the week with another down day on Friday, as the Dow dropped more than three-quarters of a percent, the S&P 500 shed 1%, and the Nasdaq lost 1.4%. All three indexes also posted weekly losses.

Potential Causes

Semiconductor shares initially led the selloff, which broadened as the session progressed. The Philadelphia Semiconductor Index, while still up about 65% year-to-date, logged its steepest weekly loss in over a year this week and has tumbled nearly 18% so far in July.

Eric Lynch, managing director and co-portfolio manager at Suncoast Equity Management, said the decline reflects investor jitters over billions in AI-related spending. "You're seeing just continued consternation surrounding, 'Hey, what's the ETA on this return on investment?' When TSMC reported this week, they said things are great, but they're going to be building 15% even higher CapEx than they guided for, and their revenues are going to go up not quite as much as that. So investors were concerned."

Context

Elsewhere in the market, shares of Netflix tumbled more than 7% after the streaming giant's weaker-than-expected earnings forecast. Shares of Uber dropped 2% after announcing it would acquire Germany's Delivery Hero in a deal worth nearly $15 billion. Shares of Intuitive Surgical plunged 14% after the company maintained its global growth forecast for procedures performed with its da Vinci surgical robots and warned that changes to some insurance coverage could impact demand.

Similar Moves in the Sector

The selloff in semiconductor stocks comes amid growing concerns that massive AI-related spending may not yield returns as quickly as expected. Investors are closely watching earnings from hyperscalers like Microsoft, Google, and Amazon to see if their revenues are keeping pace with their capital expenditures.