U.S. equities ended the week sharply lower, led by a broad sell-off in technology shares as investors grew increasingly concerned about the long-term sustainability of massive artificial intelligence spending.
The Nasdaq fell 2.3%, while the S&P 500 declined 1.2% and the Dow Jones Industrial Average slipped 0.3%. Semiconductor stocks were among the hardest hit, with the SOXX and SMH chip ETFs dropping more than 5%. Nvidia lost over 3%, while Intel, Arm and KLA fell around 4%. Applied Materials and Lam Research each declined roughly 5%.
Investor sentiment was also weighed down by fresh competition from China. AI startup Moonshot AI introduced a new language model that it claims significantly narrows the performance gap with leading U.S. systems, adding to concerns about the competitive landscape.
According to analysts at Brown Brothers Harriman (BBH), markets are beginning to question whether the current pace of AI-related capital spending can be maintained. They also pointed to the Bank for International Settlements' warning that transformative technologies have historically been accompanied by boom-and-bust investment cycles.
Adding to market uncertainty, renewed military tensions between the United States and Iran pushed oil prices higher, with West Texas Intermediate crude trading above $81 a barrel and Brent crude rising past $86. The combination of geopolitical risks and weakening confidence in the AI trade added further pressure to global markets.