The semiconductor ETF iShares SMH is down nearly 7% for the week as investors question AI spending sustainability
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Global chip stocks extended a sell-off on Friday, pulling U.S. equity futures lower ahead of the opening bell. Nasdaq $NDAQ-100 futures were off 1.9%, S&P 500 futures retreated 0.9%, and Dow Jones Industrial Average futures were down roughly 335 points, equivalent to a 0.6% decline.
The iShares Semiconductor ETF slipped 3.7% before the open, putting it on track for a 6.9% weekly drop — which would mark its third losing week out of the past four. Applied Materials $AMAT and LAM Research were each off roughly 5% in premarket action, with Intel $INTC and KLA Corporation $KLAC both losing more than 4%. Arm, Micron $MU, and Nvidia $NVDA each saw declines in the 3%–4% range.
The sell-off spread across Asia and Europe. Japan's Nikkei 225 ended the session down 4%, and Taiwan's key index lost 6.5%. Mainland China's CSI 300 shed 3.6%, Australia's S&P/ASX 200 gave up 0.5%, and South Korean markets sat out the session due to a national holiday. In Europe, ASML $ASML retreated 4.4%, STMicroelectronics gave back 7%, and Infineon was off 5.6%.
Strategists at BBH said in a Friday note that investors are "increasingly questioning the sustainability of the ongoing AI capital expenditure boom," pointing to a Bank for International Settlements annual economic report that "cautions that boom-bust cycles are a regular feature of past investment surges driven by transformative technologies," according to CNBC.
Brent crude futures rose above $86 a barrel, with oil prices remaining elevated as the U.S.-Iran conflict continued to disrupt energy flows through the Strait of Hormuz, which handles around 20% of the world's oil traffic. According to the U.S. Central Command, American forces carried out a sixth straight night of strikes on Iran, with dozens of military sites targeted, among them logistics networks and naval assets. Iranian officials said on Friday they had targeted U.S. military forces in Syria and Bahrain.
Netflix $NFLX stock also weighed on sentiment, falling more than 9% in premarket trading after the company said it expects revenue and profit gains to slow in the third quarter, according to The Wall Street Journal.
On a weekly basis, the S&P 500 has given up 0.6%, the Dow is off 0.2%, and the Nasdaq has declined 1.5%.
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