NEW YORK — U.S. stocks paused on Thursday as renewed selling in semiconductor shares prompted investors to reassess the durability of the artificial intelligence-driven rally that has powered equity markets to record highs this year, even as second-quarter earnings and fresh economic data pointed to continued resilience in the broader economy.
The S&P 500 and Nasdaq declined in afternoon trading, while the Dow Jones Industrial Average outperformed after gains in healthcare shares offset weakness in technology. The Philadelphia Semiconductor Index dropped sharply, extending losses from the previous session as investors took profits in chipmakers that have been among Wall Street's strongest performers in 2026.
Shares of Taiwan Semiconductor Manufacturing Co. fell despite the company reporting stronger-than-expected quarterly earnings and raising its outlook, a move that underscored growing investor caution over whether continued heavy spending on AI infrastructure will justify elevated valuations across the sector. Memory-chip manufacturers, including Micron Technology, Western Digital and Seagate Technology, also traded lower.
Market participants said the retreat reflected increased scrutiny of AI-related stocks after months of outsized gains rather than evidence of weakening demand for artificial intelligence technologies. Analysts noted that expectations for AI deployment remain high, but investors are increasingly focused on the pace at which spending translates into broader corporate earnings and productivity gains.
Fresh U.S. economic data offered a mixed but generally supportive picture for financial markets. Retail sales in June rose modestly, while weekly initial jobless claims fell, suggesting consumer demand and the labor market remained resilient despite higher borrowing costs. Together with recent inflation readings, the data reinforced expectations that the Federal Reserve is likely to leave interest rates unchanged at its next policy meeting.
Outside technology, healthcare stocks provided support after UnitedHealth Group raised its 2026 profit forecast, lifting its shares and helping the Dow outperform broader benchmarks. Consumer staples also advanced as investors rotated into more defensive sectors.
Global markets also reflected the more cautious mood. Technology-heavy benchmarks in Asia and Europe weakened as semiconductor shares came under pressure, while higher oil prices linked to geopolitical tensions in the Middle East added to investor uncertainty and pushed Treasury yields modestly higher.
Investors are expected to remain focused on the next round of corporate earnings and economic reports for further evidence on whether robust AI-related investment and resilient economic fundamentals can continue to support U.S. equities after their strong gains earlier this year.
