TLDR
- The Nasdaq fell around 1.6%, the S&P 500 dropped 0.8%, and the Dow dipped 1% on Friday
- Chip stocks entered bear market territory, falling over 3% as tracked by the PHLX Semiconductor Index
- Japan’s Nikkei 225 dropped 4%, adding pressure to global markets
- Netflix fell 12% after its Q3 revenue forecast missed Wall Street expectations
- China’s Moonshot AI unveiled Kimi K3, adding to uncertainty around the AI trade
US stocks fell on Friday, putting major indexes on track for weekly losses. The sell-off was led by the semiconductor sector and a sharp drop in Netflix shares.
The Nasdaq Composite shed around 1.6%. The S&P 500 fell roughly 0.8%, and the Dow Jones Industrial Average dropped about 1%.
Chip stocks were the hardest hit. The PHLX Semiconductor Index fell more than 3%, pushing the sector into bear market territory.
Chip Stocks Enter Bear Market
The chip sell-off was partly driven by weakness in Asian markets. Japan’s Nikkei 225 dropped 4% overnight, weighing on investor sentiment heading into the US trading session.
The tech-driven rally that lifted markets from March lows has now stalled. Investors have started to pull back as they reassess how much companies are spending on artificial intelligence.
That reassessment picked up pace on Friday. Chinese AI startup Moonshot unveiled a new model called Kimi K3, which it describes as the world’s largest open AI model, rivaling models from leading US AI companies.
The news added to existing uncertainty around the AI trade. Investors have been watching closely to see whether AI spending will translate into real returns.
Netflix Drops 12% on Weak Outlook
Netflix shares dropped 12% in early trading. The streaming company’s third quarter revenue forecast came in below what Wall Street had expected.
The company acknowledged it is operating in a “dynamic and competitive” entertainment landscape. That language did little to reassure investors already on edge.
Netflix’s miss came at a bad time. Markets were already under pressure from the chip sell-off and broader concerns about AI spending.
The broader market mood on Friday was cautious. There were few bright spots across the major indexes as selling continued through the session.
On the earnings front, smaller banks including Truist Financial Corporation and Fifth Third Bancorp also reported this week. Their results rounded out a busy stretch of financial sector earnings.
Investors also looked to fresh economic data. The University of Michigan’s consumer sentiment report offered a read on how Americans are feeling about the economy and rising gas prices.
The combination of weak earnings, a struggling chip sector, and global market pressure made for a rough end to the week. All three major US indexes were on pace for weekly losses as of Friday afternoon.
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