Nasdaq Composite: fell 2.3%, the S&P 500 lost 1.2%, and the Dow declined 0.3% (169 points) on Friday, July 17.
Semiconductor ETF rout: The iShares Semiconductor ETF (SOXX) and VanEck Semiconductor ETF (SMH) each dropped more than 5%. SMH is down 10% for the week.
Chip stocks hit hard: Applied Materials and LAM Research fell ~5%, while Intel, KLA Corporation, Arm, and Nvidia lost 3–4%. Astera Labs led the sell-off this week with a 23% decline.
Netflix plunged 10%+: after second-quarter earnings matched expectations but a weak Q3 revenue forecast disappointed investors. The company also said it will reduce the frequency of its "What We Watched" engagement reports.
Apple surpassed Nvidia: as the most valuable U.S. company by market cap, as Nvidia shares dropped 3.5%.
Chinese AI startup Moonshot AI: unveiled a new model (Kimi K3) said to narrow the gap with top U.S. offerings, adding to AI spending concerns.
Oil prices rose: amid U.S.-Iran conflict escalation. WTI crude traded above $81/barrel and Brent above $86/barrel. Iran attacked a power plant in Kuwait and claimed to have targeted U.S. forces in Syria and Bahrain.
Gold snapped a losing streak: , rising 0.6% to around $4,000/oz. The 10-year Treasury yield fell to 4.525% as investors sought safety.
European and Asian markets followed lower: The pan-European Stoxx 600 fell 0.6%, the Nikkei 225 dropped 4%, and SoftBank sank 9.2%. South Korean markets were closed.
Import prices rose: 0.3% monthly and 7.1% annually in June — the largest yearly increase since August 2022 — driven by a surge in Chinese import costs.
Why this matters: This sell-off signals a potential turning point for the AI-driven rally that has dominated markets. If major tech companies scale back AI capital expenditure projections, the ripple effects could be felt across global equities, venture capital, and startup valuations.
The PHLX Semiconductor Index (^SOX) entered bear market territory on Friday, tumbling more than 3% and extending weekly losses. This marks the third weekly decline in four weeks for the SMH ETF, which is now 10% lower for the week.
Strategists at BBH noted that investors are "increasingly questioning the sustainability of the ongoing AI capital expenditure boom." The Bank for International Settlements (BIS) annual economic report cautioned that boom-bust cycles are a regular feature of past investment surges driven by transformative technologies.
Barclays strategists took a more measured view, stating: *"While Tech volatility may persist in the near term, we believe that the reset in positioning should ultimately prove healthy, creating more attractive entry points for long-term investors targeting the structural AI theme."*
The emergence of Moonshot AI's Kimi K3 model — which it claims is the world's largest open AI model — adds competitive pressure to U.S. AI leaders like Anthropic, potentially accelerating the need for further spending.
Netflix shares fell more than 10% after reporting Q2 earnings of $0.80 per share on revenue of $12.56 billion, roughly in line with LSEG analyst estimates of $0.79 EPS on $12.59 billion revenue. The disappointing factor was a weak Q3 revenue forecast, signaling that the streaming giant expects a "dynamic and competitive" landscape ahead. Additionally, the company's decision to reduce the frequency of its engagement reports reduces transparency for investors tracking platform usage.
Oil markets remain under pressure as the fragile truce in the Middle East has fractured. Iran's attack on a Kuwaiti power and desalination plant, combined with U.S. Central Command's sixth consecutive evening of strikes against Iranian targets, has disrupted energy flows through the Strait of Hormuz — which handles approximately 20% of the world's oil traffic. This has pushed oil prices above $81 (WTI) and $86 (Brent).
*Data compiled by Yanuki using the latest trends and market data.*
For investors: Consider diversifying exposure away from overconcentrated tech holdings. Defensive sectors such as utilities and consumer staples outperformed on Friday.
For businesses reliant on AI infrastructure: Monitor capital expenditure announcements from major cloud providers (Microsoft, Amazon, Google) for signals on spending adjustments.
For consumers: Rising oil prices may push gasoline costs higher. Lock in fuel prices where possible and watch for increased volatility in energy markets.
Growth-focused investors: with heavy exposure to tech ETFs or individual semiconductor stocks
Streaming industry watchers: monitoring Netflix's competitive positioning against Disney+, Amazon Prime, and new entrants
Global supply chain operators: impacted by potential Strait of Hormuz disruptions
Startups: relying on continued AI investment from Big Tech
Why are semiconductor stocks falling so sharply?
Investors are increasingly questioning whether the massive spending on AI infrastructure is sustainable. The BIS annual report warned that transformative technologies often follow boom-bust cycles. Additionally, Chinese startup Moonshot AI unveiled a competitive model, adding to concerns about the ROI of U.S. AI capital expenditure.
Is this the end of the AI rally?
Not necessarily. Barclays strategists believe the reset in positioning could create attractive entry points for long-term investors. However, short-term volatility is expected as the market reassesses valuations.
How are oil prices being affected by the U.S.-Iran conflict?
Oil has risen sharply, with WTI above $81/barrel and Brent above $86/barrel. Disruptions to the Strait of Hormuz — which carries 20% of global oil traffic — are the primary driver.
Should I sell my tech stocks?
Decisions should be based on your individual risk tolerance and investment horizon. Diversification into defensive sectors and non-tech assets may help mitigate short-term volatility.
Tech volatility is likely to persist — The AI trade is undergoing a reassessment. Monitor earnings calls from Nvidia (next earnings) and other chipmakers for forward guidance.
Diversification matters — On Friday, utilities and consumer staples bucked the downtrend, showing the value of balanced portfolios.
Oil prices are a wildcard — The U.S.-Iran conflict could keep energy prices elevated, impacting inflation and consumer spending in the months ahead.
Watch the bond market — Falling Treasury yields signal a flight to safety. If yields continue to drop, it may indicate growing recession fears.
Netflix's struggles are a bellwether — The streaming market is getting more competitive. Keep an eye on subscriber growth trends across the industry.
The markets are sending mixed signals — a chip sell-off, a streaming giant stumbling, and geopolitical tensions flaring up all at once. What's your take? Are we seeing a healthy correction or the beginning of a broader downturn?
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