US stock indices concluded Friday's trading session in negative territory. The release of a new model, Kimi K3, by Moonshot AI, employing a low-cost, open-source strategy, has once again shaken the market's core assumptions regarding massive AI computing power investments. This triggered a sharp sell-off in global technology and semiconductor stocks, with investor concerns over a potential repeat of a "DeepSeek moment" rapidly spreading. The Philadelphia Semiconductor Index has now retreated more than 20% from its record closing high set on June 22, entering bear market territory.
The index fell 10% this week, marking its largest weekly percentage decline since April 2025. All three major US stock indices registered weekly losses. The Dow Jones Industrial Average fell 0.93% for the week, the Nasdaq Composite dropped 2.9%, and the S&P 500 index declined 1.55%.
At the close, the Dow was down 406.55 points, or 0.77%, at 52,146.42. The Nasdaq fell 361.70 points, or 1.40%, to 25,520.24. The S&P 500 lost 76.08 points, or 1.01%, to finish at 7,457.69.
Chip stocks showed a mixed performance. Western Digital Corp (WDC.US) gained 2.23%, while SK Hynix Inc (SKHY.US) ADRs rose 1.13%. NVIDIA Corp (NVDA.US) fell 2.21%, Meta Platforms Inc (META.US) declined 2.79%, and SpaceX (SPCX.US) dropped 5.43%. Apple Inc (AAPL.US) closed up 0.14%, with its market capitalization briefly surpassing that of NVIDIA during the session. The Nasdaq Golden Dragon China Index fell 1.82%, with Alibaba Group Holding Ltd (BABA.US) down 2%.
In European markets, Germany's DAX 30 index fell 27.30 points, or 0.11%, to 24,839.16. The UK's FTSE 100 index rose 23.21 points, or 0.22%, to 10,595.45. France's CAC 40 index lost 39.05 points, or 0.47%, to 8,338.81. The Euro Stoxx 50 index declined 48.56 points, or 0.77%, to 6,235.05. Spain's IBEX 35 index fell 22.17 points, or 0.12%, to 19,216.23. Italy's FTSE MIB index dropped 490.96 points, or 0.94%, to 51,883.00.
Asian markets also saw declines, with Japan's Nikkei 225 index falling 4.03%. South Korean markets were closed for a holiday.
The US dollar index was largely unchanged on the day. The index, which measures the dollar against a basket of six major currencies, edged up to 100.765 in late trading from 100.763 the previous session. By the close in New York, one euro could buy $1.1436, down from $1.1438. One pound sterling was worth $1.3454, down from $1.3470. One US dollar bought 162.45 Japanese yen, up from 162.39, and 0.8075 Swiss francs, down from 0.8089. One US dollar traded for 1.4011 Canadian dollars, down from 1.4048, and 9.6497 Swedish kronor, down from 9.6499.
In the cryptocurrency market, Bitcoin continued to hover near the $64,000 level, last trading at $63,974.28. Ethereum fell more than 1.6% to $1,839.25.
International oil prices posted significant gains. The August contract for West Texas Intermediate crude rose $3.54, or 4.48%, to settle at $82.49 per barrel. The September contract for Brent crude gained $3.87, or 4.59%, to close at $88.10 per barrel.
Spot gold rose 1% to $4,018.36 per ounce, while spot silver gained 0.77% to $55.55.
Key Economic Developments
Former President Donald Trump commented on the June inflation data, calling it "great news" and heralding a "golden age" for America. He noted the Consumer Price Index recorded its largest monthly decline in six years, falling below every economist's forecast in a survey of 67 experts. Prices dropped for various goods including gasoline, electricity, auto insurance, hotels, and prescription drugs. With strong wage growth and falling prices, real wages increased by 0.8%. He stated that with investment pouring in, factory construction expanding rapidly, manufacturing jobs increasing, and prices continuing to fall, America has entered its golden age.
The cost of hedging against US dollar fluctuations has fallen to its lowest level this year. A key one-month implied volatility measure for the dollar spot index fell this week to its lowest since December, a significant retreat from its spike after the Iran conflict in March. This suggests traders see little chance of a major disruptive event impacting the global reserve currency, despite uncertainty over Federal Reserve policy and the rekindled Middle East conflict. This calm market environment reinforces a key feature of this year: the resilience of US equities and reduced currency volatility, encouraging investors to flock to carry trades that profit from interest rate differentials and perform best when exchange rates and risk appetite are stable. Francesco Pesole, a foreign exchange strategist at ING, noted the decline in dollar volatility is "remarkable," adding that equity market resilience, underpinned by the AI boom, appears to be stabilizing exchange rates and maintaining a self-reinforcing environment of low volatility and prevalent carry trades. He suggested this trading strategy would remain popular even if tech stocks correct.
US consumer sentiment improved in July, reaching a five-month high, though the rebound may be temporary as renewed Middle East conflict has pushed gasoline prices higher. The University of Michigan's consumer sentiment index rose to 54.4 this month, the highest level since February, from a final reading of 49.5 in June. Economists had forecast a rise to 51.0. Over 70% of the survey interviews, conducted from June 23 to July 13, were completed before the breakdown of a US-Iran ceasefire last week, which sent oil prices to a one-month high. Joanne Hsu, director of the Surveys of Consumers, stated that the improvement in sentiment was broad-based across age, income, wealth, and political affiliation. However, she cautioned that with prices still elevated, consumers are not optimistic about the economy, with the index down 12% from a year ago. Therefore, if the recent decline in gasoline prices continues to reverse, this rebound in confidence may not be sustained.
Corporate News Updates
According to sources, Apple Inc (AAPL.US) is in early-stage settlement discussions with the US Department of Justice regarding a 2024 lawsuit alleging the company violated antitrust laws. It is reported that both sides are actively negotiating, though there is no guarantee a final agreement will be reached. Apple has reportedly presented several proposals to the Justice Department to resolve the case. The lawsuit, filed by the Justice Department and 15 states in 2024, accuses Apple of monopolizing the smartphone market, harming smaller competitors, and raising prices. It is unclear whether state attorneys general are involved in the settlement talks.
Sources indicate Meta Platforms Inc (META.US) is in talks to lease AI data center computing capacity to Anthropic, in a potential two-year agreement valued up to $10 billion. According to the report, Anthropic proposed the partnership in June, and Meta is currently evaluating it, with details still being adjusted. Under the proposal, Anthropic would make monthly payments to Meta over two years, and both companies would have the right to terminate the agreement early. The scale of this potential deal with Meta is reportedly about one-third the size of a contract Anthropic signed with SpaceX in May. Sources caution that the negotiations are in early stages and may not materialize.
Former President Trump commented on Taiwan Semiconductor Manufacturing Company Ltd (TSM.US)'s announcement of an additional $100 billion investment in its Arizona semiconductor fabrication plant, bringing its total US investment to a record $265 billion. He stated his trade policies and agreements are delivering on his promises, bringing advanced manufacturing back to America across sectors from autos and pharmaceuticals to semiconductors, heralding a "golden age" and inviting everyone to build factories in the US.
Sources report that SpaceX (SPCX.US) is in talks with the US Department of Defense to provide tens of billions of dollars worth of computing power for the agency's AI projects, potentially deepening the relationship between Elon Musk's company and the Pentagon. The negotiations are ongoing but could still fall apart. SpaceX has reportedly signed similar deals with Anthropic and Google in recent months and is planning a significant expansion of its cloud computing business. SpaceX employees have recently discussed plans to offer computing power to AI clients at lower prices to compete more directly with existing suppliers like CoreWeave.
Analyst Actions
UBS Group lowered its price target for Netflix Inc (NFLX.US) from $130 to $115.
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