The market's hottest trade cooled sharply this week, as the artificial intelligence stocks that fueled this year's rally led a global selloff.
According to Yahoo Finance, US stocks fell on Friday and posted weekly losses led by the semiconductor sector, with the S&P 500 dropping more than 1.5% for the week and the Nasdaq declining 2.9%. Investing.com reported that stocks snapped a two-week winning streak and that chips slid into a bear market.
Reuters, in a July 17 report, described the moves as a rotation out of the biggest winners of the recent rally, sending chip stocks toward their steepest weekly decline in more than a year. Channel News Asia said the pullback left investors from Seoul to Silicon Valley asking whether the AI boom had become over-leveraged.
Several forces are cited. Nikkei Asia reported that a Chinese AI model stoked competitive fears, hitting Nvidia and Big Tech. Kiplinger pointed to China AI worries and Netflix earnings, while other outlets flagged questions about AI demand and climbing oil prices. The Daily Camera also noted rising oil as the US launched more airstrikes on Iran.
The damage spread across big names. AOL reported Meta stock fell 5.3% on Friday, and Barron's said Alphabet was hit by two AI fears. Microsoft slipped as analysts trimmed price targets ahead of earnings, per Invezz. The selloff reached quantum-computing names too, with TradingView noting D-Wave Quantum had slid 29% in July.
The turmoil reshuffled the leaderboard: the New York Post reported Apple briefly passed Nvidia to reclaim the title of world's most valuable company on Friday, though Barron's said Nvidia narrowly held on. Overseas, LancasterOnline reported Tokyo's market fell more than 5%.
Why it matters: AI-linked chipmakers have driven much of the market's gains, so a wobble in that single trade can drag down retirement accounts and global indexes far beyond the tech sector.