NEW YORK—U.S. stocks fell on Friday, with technology and semiconductor shares leading broad market declines as investors reassessed the scale of artificial intelligence spending and weighed intensifying competition in the global AI industry.
The S&P 500 closed down about 1%, while the Nasdaq Composite dropped roughly 1.4% and the Dow Jones Industrial Average lost nearly 0.8%, extending losses that left all three major indexes lower for the week. The technology-heavy selloff accelerated after recent weakness in chipmakers spread across the broader market.
Semiconductor stocks remained under pressure as investors questioned whether heavy corporate investment in AI infrastructure would continue to justify elevated valuations. The Philadelphia Semiconductor Index recorded its steepest weekly decline in more than a year and has fallen sharply during July despite remaining well above its level at the start of the year.
Market sentiment was also affected by growing competition in artificial intelligence after Chinese startup Moonshot AI unveiled an open-source large language model that investors viewed as intensifying pressure on established technology companies. The announcement added to concerns that increasingly capable and lower-cost AI models could challenge the pricing power and future returns of companies investing heavily in AI hardware and infrastructure.
Major technology companies declined alongside chipmakers, while investors rotated toward sectors considered more defensive. Analysts said the retreat reflected a reassessment of crowded positions in AI-related stocks following a prolonged rally that had driven many technology shares to record highs earlier this year.
Outside technology, energy shares drew support from higher crude oil prices amid geopolitical tensions in the Middle East, limiting some of the broader market's losses. U.S. Treasury yields eased as investors sought relatively safer assets.
Market participants are now turning their attention to the upcoming corporate earnings season, with reports from several large technology companies expected in the coming weeks. Investors are expected to scrutinize management commentary for evidence that AI-related capital spending remains on track and is translating into stronger revenue and profit growth.
Despite the week's decline, the major U.S. equity indexes remain higher for the year, reflecting gains accumulated during the first half of 2026 before the recent pullback in AI-linked shares.
