Tech Sector Weighs on US Indices as TSMC Results Spark Renewed AI Spending Concerns

Technology stocks led major US equity indices lower after results from Taiwan Semiconductor Manufacturing (TSM) reignited market concerns over artificial intelligence-related expenditures.

The Nasdaq 100 Index closed down 1.6% in New York, while the S&P 500 Index fell 0.5%.

While Taiwan Semiconductor Manufacturing's move to raise its sales and spending outlook reflects confidence in global AI infrastructure demand, its American depositary receipts fell, with peers like Micron Technology, Marvell Technology, and Nvidia also moving lower.

"Semiconductor stocks are down again, despite a very positive earnings report and guidance," said Matt Maley of Miller Tabak + Co. "Part of the reason is related to the raised capital expenditure plans, but there is no doubt that the market's first reaction to TSMC's earnings was 'sell the news.'"

Traders have grown more cautious about AI investments this year, persistently reducing holdings in AI-related stocks on the view that massive spending has yet to deliver meaningful returns. The Philadelphia Semiconductor Index dropped 4.3%.

However, the S&P 500 Equal Weight Index rose 1% to hit a record high, indicating that other sectors remained broadly healthy despite weakness in large-cap tech stocks.

On the geopolitical front, the US launched a new round of strikes against Iran on Thursday, while Brent crude oil hovered around $85 per barrel.

Traders also digested the latest economic data. US retail sales grew modestly in June, with a decline in gas station sales partly masking strong performances from some retailers.

Shares of Alphabet Inc. (GOOGL), the parent company of Google, fell 4.4%, erasing approximately $200 billion in market value. The drop followed a report indicating that the launch of Google's flagship AI model, Gemini 3.5 Pro, has been delayed by several months from its original schedule.

At the close, the S&P 500 was down 0.5% at 7,533.77.

The Dow Jones Industrial Average fell 0.2% to 52,552.97.

The Nasdaq Composite Index declined 1.5% to 25,881.95.

The Nasdaq 100 Index dropped 1.6% to 29,025.77.

The Russell 2000 Index was down 0.1% at 2,974.567.