The Nasdaq Composite plunged 564.08 points or 2.18% to 25,319.21 at 9:34 a.m. EDT on Friday, marking one of the worst single-day declines as AI chip-related stocks witnessed extreme selling pressure. According to The Financial Express, during Thursday's regular session, the Nasdaq Composite dropped 1.4%, and tech-heavy Nasdaq-100 fell over 1.6%, with Micron Technology, Broadcom, AMD, Western Digital, Seagate, Rocket Lab, Scandisk, and Intel were the top losers, falling between 5% and 13% during the session. The recently listed SK Hynix ADR is down nearly 10% since the debut and closed over 13% lower on Thursday, reflecting the severe impact on the sector. The decline was led by the semiconductor sector, where investors reduced exposure following the strong gains accumulated over recent months, particularly among companies tied to artificial intelligence, as noted by Antonio Di Giacomo, Senior Market Analyst at XS.com. As of 9:35 a.m. Eastern time, the Dow Jones Industrial Average had fallen 451 points, or 0.9%, while the S&P 500 declined 1.3%, putting it on course for its first weekly loss in three weeks and only its third losing week in the past 16. According to preliminary data, the S&P 500 lost 75.99 points, or 1.01%, to end at 7,457.78 points, while the Nasdaq Composite lost 370.83 points, or 1.40%, to 25,511.12, with the Dow Jones Industrial Average falling 394.01 points, or 0.75%, to 52,158.96. Reuters analysts note that the Nasdaq has looked shaky since notching a record close on June 2, with market internals suggesting the weakness runs deeper than the headline index implies.
The scale of the AI sector's market influence has become alarmingly clear, with AI-linked companies accounting for 62.04% of the S&P 500's total market capitalisation as of July 2026, according to Paul Hoffman from BestBrokers.com. As of July 2026, 218 companies of the 503 index constituents are now directly linked to the AI economy, representing 43.3% of all companies, together worth $42.39 trillion. Just 58 Core AI companies – those building AI chips, models, software, and security – are collectively valued at $32.2 trillion, having a combined index weight of 47.13%. This massive concentration explains why any wobble in chip stocks can move the broader market so sharply, with the semiconductor sector facing pressure from multiple directions including rising oil prices on US-Iran tensions and uncertain Federal Reserve rate path. Over the past month, SOX has fallen by nearly 17%, closing 4.29% lower on Thursday, while the KOSPI Composite has dropped over 24% during the same period. The Philadelphia SE Semiconductor Index logged its steepest weekly loss in over a year, and has tumbled nearly 18% so far in July, even as the index remains up about 65% year-to-date, compared with the S&P 500's nearly 9% gain over the same time frame.
The sell-off extended across all major indices, with the S&P 500 falling 86.81 points or 1.15% to 7,446.96 after the opening bell, while the Dow Jones Industrial Average declined 541.32 points or 1.03% to 52,011.65 at 9:30 a.m. EDT. According to Business Standard, the S&P 500 fell 0.5% even though more stocks rose within the index than fell, with the decline coming as higher interest rates also slow the economy and hurt prices for all kinds of investments. The decline in the Dow Jones came despite earlier gains from UnitedHealth, which reported a strong quarter and even raised its guidance, but the index could not sustain those gains to finish 8% off the highs. The Philadelphia Stock Exchange Semiconductor Index fell 4.3%, reflecting the broader weakness across the sector. The sell-off extended across global markets, with Taiwan's benchmark index plunging 6.5%, Japan's market falling 4%, and Shanghai losing 3%, with shares of Taiwan Semiconductor Manufacturing Co. tumbling 7.3%. Among the major sectors of the S&P 500, energy stocks were the biggest gainers, benefiting from spiking crude prices amid signs of escalating hostilities in the Iran war. In stock markets abroad, indexes fell across much of Europe and Asia, including drops of 1.8% in Shanghai and 2.8% in Tokyo, while Hong Kong's Hang Seng was an outlier and rose 1.3%.
Alphabet stock plunged 4.43% despite reporting strong quarterly results, while Nvidia fell 2.4% and Amazon.com declined 1.99%. According to Business Standard, Nvidia, Alphabet and Amazon.com were down 2.4%, 4.43% and 1.99%, respectively. SpaceX shares plummeted 3.08% to $131.11, dropping below its IPO price of $135. However, Abbott jumped 10.7% after the healthcare company delivered a fatter profit than expected and raised its forecast for earnings over the full year, while J.B. Hunt Transport Services climbed 8% after the freight company likewise topped analysts expectations for the latest quarter. Netflix stock plunged over 9% due to weak Q3 guidance and engagement concerns, despite reporting strong quarterly results with despite a 13% year-over-year revenue increase and net income slightly above expectations. Intuitive Surgical dropped 10.8% even after delivering better-than-expected quarterly results, with analysts attributing the decline to concerns that procedure growth could slow following the expiry of enhanced tax credits.
Markets have now largely ruled out a July Federal Reserve rate hike but continue to price around a 70% probability of a 25 basis point increase in September, according to Investing.com India. The 10-year Treasury yield climbed to 4.56% from 4.55% late Wednesday and just 3.97% before the war with Iran began, with higher yields have already sent the average 30-year mortgage rate to its highest level in nearly a year. In Senate testimony on Wednesday, Fed Chairman Kevin Warsh reaffirmed his commitment to deliver price stability but also rejected the view that the AI boom would spur persistent inflation. U.S. economy reports came in mixed adding to eddies swirling through the bond market, with shoppers spent less at U.S. retailers last month than economists expected but spending by U.S. consumers remained resilient after ignoring sales at gasoline stations. A separate report said fewer U.S. workers applied for unemployment benefits last week, an indication of a solid job market while a third report said manufacturing in the mid-Atlantic region is better than economists expected. Fed Vice Chair Philip Jefferson, Dallas Fed President Lorie Logan, and Kansas City Fed President Jeff Schmid are scheduled to provide perspectives throughout the day.
Oil prices are holding near their highest levels in a month, with Brent crude increasing 2.9% to $86.70 per barrel as the United States broadened its air campaign against Iran. According to The Times of India, early on Friday, the United States broadened its air campaign against Iran by targeting additional bridges and bringing down a tower at a major Iranian port, forming part of President Donald Trump's efforts to increase pressure on Tehran to ease its control over the Strait of Hormuz. Oil prices have climbed to around their highest level in a month amid concerns that the conflict with Iran could continue to disrupt tanker traffic through the Strait of Hormuz, affecting the movement of crude oil from the Persian Gulf to markets around the world. Brent crude, the global benchmark, climbed 2.9% to $86.70 a barrel, compared with roughly $76 a week earlier, with oil prices having surged around 12% this week following renewed hostilities between the U.S. and Iran. Energy stocks were the biggest gainers among major sectors, benefiting from spiking crude prices amid signs of escalating hostilities in the Iran war. In the bond market, the 10-year Treasury yield edged up to 4.56% from 4.55% late Wednesday and just 3.97% before the war with Iran began, with higher yields having already sent the average 30-year mortgage rate to its highest level in nearly a year.
