US stocks fall amid AI impact

U.S. stock index futures fell on Friday as a sell-off in semiconductor stocks intensified, forcing investors to reassess the sustainability of this year's AI-driven rally, while Netflix's weak forecasts added to the pressure.

After a record rally that lifted major Wall Street indexes to all-time highs, investors began to unwind crowded semiconductor trades as concerns about the scale of AI-related spending resurfaced.

Semiconductor stocks broadly underperformed, extending the previous session's losses, with Nvidia shares falling 2.7% and Intel shares dropping 2.8% in pre-market trading, respectively. The semiconductor index fell 2.4%.

The Philadelphia Semiconductor Index hit a nearly two-month low on Thursday and was on track for its worst weekly performance since March 2025. The index has lost more than 19% from its record high set in late June.

Strong earnings from TSMC, the world's leading manufacturer of advanced AI chips, and ASML, a key supplier of advanced chipmaking equipment, did little to ease concerns about the sustainability of the chip stock rally.

Chris Beauchamp, chief market analyst at IG trading brokerage, said: "This is turning from a simple chip stock sell-off into a broader phenomenon. That's evident in indexes like the Nasdaq, which has achieved such a massive and rapid rise in a very short period of time."

Netflix shares weighed on market sentiment after the streaming giant forecast third-quarter revenue and profit below Wall Street expectations. Its shares fell nearly 10%. The renewed volatility pushed the CBOE Volatility Index, Wall Street's fear gauge, to its highest level in more than a week, up 1.36 points to 18.09.

At 7:07 a.m. ET, Dow Jones futures fell 272 points, or 0.52%, S&P 500 futures declined 59.5 points, or 0.79%, and Nasdaq 100 futures dropped 454.25 points, or 1.55%.

Thursday's losses, led by semiconductor stocks, had already set the stage for a market decline. The major indexes were heading for a weekly loss, despite an optimistic start to the second-quarter earnings season from major banks and moderate inflation data earlier in the week.

Geopolitical risks also came to the fore. Iran announced new attacks on U.S. facilities in the Gulf after six consecutive nights of U.S. strikes on Iranian military targets. The escalation followed the collapse of the fragile ceasefire reached last month, renewing concerns about energy flows through the Strait of Hormuz, adding to price pressures.

Beauchamp added: "There is no doubt that there are concerns that we are about to see a broader sell-off exacerbated by what is happening between the United States and Iran." Meanwhile, new accusations by U.S. President Donald Trump of Chinese interference in U.S. elections threatened to undermine the fragile truce with Chinese President Xi Jinping, just two months before the scheduled summit in Washington.

Among other companies moving in pre-market trading, shares of Intuitive Surgical fell 11.2%, despite the medical device maker beating Wall Street estimates for second-quarter profit and revenue on strong demand for its surgical systems.