US stocks closed lower on Friday, capping a weak week for Wall Street as a deepening selloff in semiconductor stocks and renewed concerns over artificial intelligence spending weighed on investor sentiment.
The decline came despite a strong start to the second-quarter earnings season, with rising geopolitical tensions in the Middle East adding to market uncertainty.
The Dow Jones Industrial Average fell 394 points, or 0.75%, to close at 52,158.96.
The S&P 500 declined 1.01% to 7,457.78, while the Nasdaq Composite dropped 1.40% to 25,511.12.
For the week, the S&P 500 lost more than 1%, the Nasdaq fell over 2%, and the Dow slipped nearly 1%.
Semiconductor stocks lead market lower
Technology shares remained under pressure as investors continued to reassess the sustainability of the artificial intelligence investment boom that has fueled markets over the past year.
The VanEck Semiconductor ETF (SMH) fell more than 8% for the week, marking its third weekly decline in four weeks.
The Philadelphia Semiconductor Index recorded its steepest weekly loss in more than a year and has fallen nearly 18% so far in July, although it remains up about 65% year to date.
The latest pressure followed the launch of a new artificial intelligence model by Chinese startup Moonshot AI, which claimed its Kimi K3 model narrows the gap with leading offerings from US companies.
The announcement added to concerns that increasing competition could reduce future demand for advanced AI chips and moderate the pace of technology spending.
The weakness in chipmakers eventually spread across the broader market as investors trimmed exposure to AI-related stocks.
Netflix was also among the session’s notable decliners, falling more than 6% after its earnings outlook failed to reassure investors about the sustainability of its growth.
Uber Technologies also declined after announcing its planned acquisition of Germany’s Delivery Hero in a deal valued at nearly $15 billion.
Shares of Intuitive Surgical also moved lower after the company maintained its procedure-growth forecast while warning that insurance-plan changes may be delaying patient care.
Earnings remain strong despite market weakness
Although equity markets finished the week lower, the second-quarter earnings season has started on a positive note.
According to LSEG, 49 S&P 500 companies have reported results so far, with 90% exceeding analysts’ expectations.
Analysts now expect aggregate second-quarter S&P 500 earnings growth of 26%, up from projections of 19.2% at the beginning of April. Strong bank earnings earlier in the reporting season have helped lift overall expectations.
Economic data released on Friday presented a mixed picture.
Consumer sentiment improved to a five-month high in July, while industrial production edged up 0.1%. However, single-family housing starts and building permits both declined.
Middle East tensions lift energy stocks and oil prices
Investors also monitored escalating geopolitical tensions after the United States and Iran continued military strikes across the Middle East.
The renewed conflict has disrupted energy flows through the Strait of Hormuz, a key global oil shipping route, supporting higher crude prices.
US West Texas Intermediate crude traded above $81 per barrel, while Brent crude remained above $86.
The rise in oil prices helped energy stocks outperform the broader market, making the sector the strongest performer within the S&P 500 during Friday’s session.