The Dow Jones Industrial Average ended Friday down 125.78 points, or 0.23%, at 51,794.84, as a broad selloff in technology and semiconductor stocks weighed on the market. The S&P 500 slipped 0.27% to 7,337.68, and the Nasdaq Composite fell 0.48% to 25,236.88, extending weekly losses for both indexes.
Despite the daily decline, the Dow posted a modest weekly gain of 0.62%. The S&P 500 lost more than 1% for the week, while the Nasdaq dropped 4%, underscoring the rotation away from high-growth tech names.
Chip Stocks Slide on AI Spending Doubts
Semiconductor stocks remained under pressure as investors questioned whether massive investments in artificial intelligence infrastructure will generate returns quickly enough. The PHLX Semiconductor Index tumbled, extending recent volatility among AI-related chipmakers that have driven much of Wall Street's gains in recent years.
Micron Technology fell 4%, Advanced Micro Devices declined 2%, and Intel dropped more than 3%. Sentiment was further dampened by a New York Times report that OpenAI is considering delaying its initial public offering until next year, citing weak post-debut performance from SpaceX and broader volatility in AI-related stocks. SpaceX shares closed 0.15% higher after earlier gains tied to its inclusion in the Russell 1000 index.
The technology selloff spread globally. SoftBank Group plunged more than 12%, while South Korea's Kospi and Kosdaq indexes fell 5.81% and 4.10%, respectively, as investors reassessed AI spending and technology valuations.
Defensive Sectors Outperform as Healthcare Rallies
As technology shares weakened, investors rotated into more defensive areas of the market. The S&P 500 information technology sector fell 1%, while healthcare stocks continued to attract buying interest after outperforming in the previous session.
Eli Lilly surged 7%, Johnson & Johnson gained more than 3%, and AbbVie rose over 1%. Consumer staples advanced more than 1%, while financials and utilities added 0.8% and 0.4%, respectively. Moderna also rallied sharply, climbing to its highest level since 2024 after hosting an investor event that showcased its development pipeline.
This rotation reflects a broader shift toward sectors with durable cash flows and defensive characteristics amid lingering inflation concerns and rate uncertainty.
Inflation Worries and Rate Hike Expectations
Fresh inflation data influenced sentiment. Data released Thursday showed US inflation climbed above 4% in May, driven by higher energy prices linked to the conflict in the Middle East. Although oil prices retreated as geopolitical tensions eased, analysts noted that Apple's recent price increases highlighted persistent inflation pressures.
Investors weighed better-than-expected consumer sentiment data and an improved inflation outlook, even as Minneapolis Federal Reserve President Neel Kashkari said he expects one interest rate increase this year due to rising inflation pressures. Traders are pricing in one 25-basis-point hike and a nearly 27% probability of another increase before year-end, according to LSEG data.
For context on the broader market dynamics, see our coverage of Dow Edges Lower as Chip Rally Offsets Iran Tensions, Fed Minutes Eyed and Magnificent 7 Stocks Hit Decade-Low Valuation Premium Over S&P 500.
As the market digests these crosscurrents, the divergence between defensive and tech sectors may persist, with investors closely watching AI spending trends and inflation data for direction.
This article is for informational purposes only and does not constitute financial advice.
