AI-fueled Stock Market Surge Hit by Chip Fatigue

Wall Street faced a decline as stocks linked to the AI boom saw a pullback, spreading a risk-off sentiment. Notably, semiconductor shares led the initial selloff, impacting major indices. The SOX index has notably entered a bear market since June 22, while earnings season starts strong.

Wall Street extended its decline on Friday, with stocks associated with the AI boom retreating and triggering a broader risk-off sentiment. The slump was initially led by semiconductor shares, which have significantly contributed to market gains in recent sessions.

All major U.S. stock indexes posted losses, with the Philadelphia SE Semiconductor Index suffering its steepest weekly loss in over a year, falling more than 18% in July. Despite this, the index remains up nearly 65% year-to-date, compared to the S&P 500's approximate 9% gain.

The second-quarter earnings season commenced on a promising note, with 90% of reporting S&P 500 companies exceeding expectations. However, challenges persist, as demonstrated by Netflix's significant stock drop due to a weak earnings forecast and Uber's 2.1% fall following acquisition news.