US stocks closed lower on Friday, July 17, as a selloff in semiconductor shares intensified, contributing to a broader risk-off sentiment. All three major US stock indices recorded losses for the day and the week. The Philadelphia Semiconductor Index fell over 18% in July, marking its steepest weekly loss in more than a year, while remaining up nearly 65% year-to-date. The index confirmed it entered a bear market on June 22, closing 20.2% below its record high on that date.
Key Details
The Dow Jones Industrial Average dropped 406.55 points, or 0.77%, to 52,146.42. The S&P 500 decreased by 76.08 points, or 1.01%, to 7,457.69, while the Nasdaq Composite fell 361.70 points, or 1.40%, to 25,520.24. The declines were largely driven by concerns over a potential slowdown in spending related to artificial intelligence, with some investors reducing their exposure to the sector. Ryan Detrick, chief market strategist at Carson Group, noted,
It’s like the market has chip fatigue. Chip stocks are down three of the last four weeks, and it’s the same worries, the same concerns; those stocks got way ahead of themselves, and now they’re coming back to Earth.
Background
Among the Magnificent Seven AI-related stocks, all but Apple saw declines, with Meta and Alphabet experiencing the largest drops of 2.7% and 3.2%, respectively. The trend reflects a shift in investor sentiment as concerns about the sustainability of the AI boom grow.
The decline in semiconductor stocks is likely to affect technology sector valuations and investor sentiment, particularly in AI-related investments. The broader market may experience increased volatility as concerns over economic growth and spending persist. Investors will watch for upcoming earnings reports from major tech companies to gauge the health of the sector.