U.S. equity markets opened lower on Friday evening, Beijing time. Growing investor concerns over artificial intelligence spending weighed on market sentiment, dragging down technology stocks. U.S. Treasury yields declined.
The Dow Jones Industrial Average fell 527.89 points, or 1.00%, to 52,025.08. The Nasdaq Composite dropped 472.35 points, or 1.83%, to 25,409.60. The S&P 500 index declined 90.43 points, or 1.20%, to 7,443.34.
As traders continued to monitor escalating tensions in the Middle East, U.S. Treasury yields fell on Friday. This followed a week of economic data indicating the U.S. economy is feeling inflationary pressure stemming from U.S.-Iran tensions.
The key 10-year Treasury yield, a benchmark for mortgages, auto loans, and credit card debt, fell more than 4 basis points to 4.525%. The 2-year yield, which often moves in line with expectations for the Federal Reserve's short-term rate decisions, dropped 3 basis points to 4.124%. The 30-year yield, which tends to track broader geopolitical events, declined over 3 basis points to 5.061%.
Global semiconductor stocks extended their losses on Friday, with U.S.-listed chipmaker and related company shares falling in pre-market trading. The iShares Semiconductor ETF (SOXX) fell nearly 3%, while the VanEck Semiconductor ETF (SMH) dropped over 2%.
Applied Materials and Lam Research shares declined 4% and 3%, respectively. Intel, KLA Corporation, and Arm all fell around 3%, while Micron Technology dropped more than 1%. Shares of Nvidia were down 2%.
These declines added to losses from the previous session, which was also led lower by the semiconductor sector.
The SMH ETF is down 6.9% for the week, on track for its third weekly decline in four weeks. The major stock indexes are also lower for the week, with the S&P 500 down 0.6%, and the Dow and Nasdaq falling 0.2% and 1.5%, respectively.
Selling accelerated in Asia-Pacific markets on Friday, with chip stocks continuing their slide. The sell-off also spread to European markets.
Strategists at BBH noted in a Friday morning report that investors are "increasingly questioning the sustainability of the current AI capex boom."
They pointed out, "The BIS annual economic report warned that boom-bust cycles have been common in past investment booms driven by transformative technologies."
Meanwhile, Barclays strategists appeared unfazed by the tech stock volatility in their Friday report.
They stated, "While tech volatility may persist in the near term, we believe a repositioning of portfolios will ultimately prove healthy, creating a more attractive entry point for long-term investors targeting structural AI themes."
Beyond chip stocks, Netflix shares were a major drag on Friday, falling over 11% after the company reported second-quarter results largely in line with expectations but issued disappointing profit guidance.
Further escalation in the U.S.-Iran conflict remained a market focus on Friday, driving oil prices higher. U.S. West Texas Intermediate crude futures recently traded above $80 per barrel, while the international benchmark Brent crude was above $85.
U.S. Central Command stated it had completed a sixth consecutive night of strikes against Iran overnight, hitting dozens of military targets, including logistical infrastructure and maritime capabilities.
Iranian officials claimed on Friday to have launched attacks against U.S. forces in Syria and Bahrain, expanding Tehran's strikes further across the Middle East.
This follows the collapse of a fragile ceasefire agreement reached last month, which has again disrupted energy shipments through the strategic Strait of Hormuz—a chokepoint that typically handles about 20% of global oil traffic.
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