Stock markets are heading for a losing week as a prolonged selloff in chip stocks and disappointing earnings from Netflix ripple through global equities, prompting investors to reassess the durability of this year’s artificial-intelligence-driven rally.
A prolonged selloff for chipmakers continued to ripple through global stock markets on Friday, triggering losses in Asia and Europe and setting up steep falls in the United States, according to Reuters. Nasdaq futures slumped 1.7% while S&P 500 futures fell 0.8%, with Nasdaq futures down 2% as the week drew to a close.
Netflix shares fell 8.6% in after-hours trading on Wednesday after the company forecast third-quarter revenue of $12.86 billion and diluted earnings per share of 82 cents, both falling short of Wall Street expectations of $13 billion in revenue and 84 cents in earnings per share. The company, which reported second-quarter revenue of $12.56 billion, said it would cut the frequency of viewing-hours reports to once yearly starting in January 2027 as it seeks new avenues of growth including advertising, live events, and video games.
The chip selloff accelerated despite strong earnings from major semiconductor suppliers. Taiwan’s TSMC said second-quarter profit blew past forecasts, and ASML, the world’s dominant supplier of equipment needed to make high-tech computer chips, raised its 2026 sales forecasts earlier in the week. Yet investors questioned whether AI infrastructure spending can justify current valuations, according to analysis from Traderverse. Semiconductor shares took a sharp hit mid-week, with the VanEck Semiconductor ETF falling more than 3% and Micron dropping 4.7% as a clear rotation out of chipmakers accelerated.
Retail investors who had borrowed to trade in the impressive AI rally contributed to the decline through unwinding of leveraged positions, according to market analyst Fabien Yip at IG. “Retail investors have borrowed to trade in this really impressive AI rally, so I think the unwinding of leveraged positions will definitely exaggerate the decline as well,” Yip said. The selloff marked a reversal of the AI momentum trade, which had seen chip stocks surge earlier in the year.
Broader market pressures also weighed on sentiment. Renewed military strikes in the Middle East were keeping oil prices elevated and reigniting concerns about inflation and growth, with Brent crude futures up 2% at $86.01 a barrel and U.S. crude advancing 2.5% to $80.92 per barrel. For the week, Brent and U.S. crude futures were set to rise more than 11% each, marking their largest gains since April.
In Asia, losses were starker across the region, with MSCI’s broadest index of Asia-Pacific shares excluding Japan down more than 3%, while the Nikkei tumbled 4%, leaving it down 12% from a recent peak. Taiwan’s stock market plunged more than 6% for its worst day since U.S. President Donald Trump’s “Liberation Day” tariffs, while China’s blue-chip index fell 3.6%.
Sources
- Reuters — Global stock market movements, Nasdaq and S&P 500 futures declines, semiconductor rout details, and oil price movements
- Reuters — Netflix earnings forecast, Q2 revenue, Q3 guidance, and after-hours stock decline
- Traderverse — Weekly market recap, semiconductor ETF performance, Micron decline, and investor concerns about AI spending valuations
- IG — Market analyst commentary on leveraged position unwinding and retail investor impact
