A deepening rout in semiconductor stocks dragged Wall Street lower on Friday, extending a selloff that has wiped out weeks of gains and left the chip sector in correction territory.
The S&P 500 fell about 1% to a one-week low, while the Nasdaq 100 slumped more than 2% to its lowest in five weeks, with the Dow proving more resilient.
The Philadelphia Semiconductor Index has now shed more than 20% from its late June record high, meeting the standard definition of a bear market for the sector.
Friday's selling began in Asia, where China's Shanghai Composite fell 3% and Japan's Nikkei tumbled 4% after Chinese AI startup Moonshot launched its Kimi K3 model, which the company says rivals the strongest offerings from OpenAI and Anthropic.
The launch revived memories of last year's DeepSeek shock, feeding doubts about whether the vast sums being poured into American AI infrastructure will earn the returns investors have priced in.
The pressure follows a bruising Thursday session in which semiconductor stocks dropped 4.8%, making technology the worst performing sector in the S&P 500.
Micron Technology, Advanced Micro Devices, Intel and Broadcom all fell more than 5% in that session, while the VanEck Semiconductor ETF slumped nearly 4%.
Nvidia's decline on Friday cost it the title of world's most valuable company, with Apple moving back to the top of the global rankings for the first time since April 2025.
The selloff is striking because it has unfolded against an otherwise supportive backdrop.
Second-quarter earnings season has started strongly, with more than 87% of the S&P 500 companies that have reported so far beating estimates, and analysts expect aggregate earnings growth of 23.7% for the quarter.
Technology earnings alone are forecast to jump 65.5% year on year.
Inflation data has also been benign, yet none of it has been enough to offset anxiety over the chip complex.
Market strategists point to the sector's outsized weight as the reason the pain is spreading, with chips now accounting for more than 20% of the S&P 500, up from about 8% three or four years ago.
Others frame the selloff as investors finally doing the maths on a cyclical industry, asking what happens once chip demand is satisfied.
Some argue the move is a mid-cycle correction rather than a full-cycle top, noting that fundamentals across the sector remain strong.
Geopolitics has added to the unease, with oil prices spiking as the US continued strikes on Iran for a sixth consecutive day, targeting supply routes supporting attacks on shipping in the Strait of Hormuz.
Netflix compounded the gloom on Friday, sliding 9% after forecasting third-quarter results below expectations.
The Vix volatility index rose to 18.03, its highest in more than a week, as all three main indexes headed for weekly losses.
