The stock market today fell across all three major indexes as a broadening chip sector selloff weighed on investor sentiment, with the Dow, S&P 500, and Nasdaq all closing lower amid renewed concerns about artificial intelligence spending sustainability.
The Dow Jones Industrial Average dropped 406.55 points, or 0.77%, to close at 52,146.42, while the S&P 500 declined 76.08 points, or 1.01%, to 7,457.69. The tech-heavy Nasdaq Composite slid 361.70 points, or 1.40%, to finish at 25,520.24, according to data from CNN and MarketWatch.
Semiconductor stocks bore the brunt of the selling pressure. The Philadelphia Stock Exchange Semiconductor Index fell 1.6% on Friday and about 10% for the week, marking its largest weekly decline in over a year, according to Reuters. The index has now dropped just over 20% from its late-June all-time high, confirming it has entered bear market territory despite remaining up more than 60% for the year.
Major chip names suffered steep losses. Nvidia fell 2.2%, Intel dropped 2%, and Applied Materials slid 5.6%, according to Reuters. Memory chip stocks including Micron and SanDisk also declined, with SanDisk closing down 4%.
The selloff reflects a sharp reversal in investor sentiment after chip stocks fueled much of the market’s rally earlier in 2026. Analysts attributed the decline to multiple factors: profit-taking in stocks that had surged rapidly, rising questions about whether artificial intelligence capital expenditure can justify valuations, and evidence that the AI boom may have become overextended.
“The pullback reflects profit-taking and rising scrutiny of AI capex sustainability,” said Toni Meadows, head of investment at BRI Wealth Management, according to Reuters. “Valuations in semiconductor stocks had priced near-perfect demand, for what has been a cyclical area in the past, so was always going to leave stocks vulnerable at some point in what has been a rapid rise.”
Several specific events intensified investor concerns. Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, raised its full-year capital expenditure forecast, sparking concerns about the cost of supporting AI infrastructure buildout, according to Investopedia. A Bloomberg report also indicated that Alphabet’s Google unit is months behind schedule on releasing Gemini 3.5 Pro, its flagship AI model, according to Reuters.
Additionally, Chinese AI startup Moonshot unveiled what it described as the world’s largest open-weight AI system, rekindling investor scrutiny of whether U.S. tech companies’ hefty AI investments will deliver adequate returns, Reuters reported.
Concerns about leverage also weighed on the market. Tony Pasquariello, head of hedge fund coverage at Goldman Sachs, noted that leverage has built up across the marketplace, visible in rising retail margin, assets under management of leveraged ETFs, and volume in short-dated options, according to Reuters. Large hedge funds have reduced exposure to top AI infrastructure players in recent weeks, bank executives told Reuters.
“People got way overextended on these names,” said Walter Todd, chief investment officer at Greenwood Capital in South Carolina, according to Reuters. “There are a lot of people under the impression over the last couple of months that these stocks only go up. And if they borrowed money to buy the positions, then they (could be) getting called out of them.”
Despite the sharp pullback, options traders showed signs of viewing the decline as a buying opportunity. Chris Murphy, co-head of derivative strategy at Susquehanna Financial Group, noted that “investors have generally been rotating rather than broadly reducing risk,” according to Reuters. Some of the hardest-hit chipmakers including SK Hynix, Micron, and SanDisk drew bullish options activity, suggesting traders saw a potential short-term oversold bottom.
Sources
- Reuters — Chip stock selloff details, semiconductor index performance, AI spending concerns, Chinese Moonshot AI model announcement, Alphabet Google delays, leverage concerns, and options market activity
- Investopedia — Major index closing data for July 17, TSMC capital expenditure forecast, Netflix revenue guidance, and weekly market performance
- CNN — Current market data for Dow, S&P 500, and Nasdaq closing levels
- MarketWatch — Real-time market closing data
