U.S. stocks extended losses on Friday as a pullback in shares linked to the artificial intelligence boom, which have driven a large part of the market's gains this year, turned into a broader wave of risk aversion.

Semiconductor stocks, which were the main driver of the market's rally in recent sessions, led the sell-off early in trading, before losses spread to broader sectors as the session progressed.

All three major U.S. indexes closed lower, and also recorded weekly losses.

The Philadelphia Semiconductor Index posted its biggest weekly loss in more than a year, and is down about 18% since the start of July.

Nevertheless, the index is still up about 65% year-to-date, compared with gains of nearly nine percent for the S&P 500 over the same period.

Read also: European stocks fall amid sell-off in auto and tech sectors

AI investors prepare for possibility of spending slowdown

A Reuters analysis showed that some investors in the AI sector have begun to prepare for a possible slowdown in the spending boom approaching a trillion dollars, as some active fund managers have already started reducing their exposure to the sector.

Ryan Detrick, chief market analyst at Carson Group in Omaha, Nebraska, said: "The market seems to have tired of chip stocks. Semiconductor shares have fallen in three of the last four weeks and the concerns are the same: these stocks have risen to overvalued levels, and are now gradually returning to earth."

According to preliminary data, the S&P 500 fell 75.99 points, or 1.01%, to close at 7,457.78 points.

The Nasdaq Composite dropped 370.83 points (1.40%) to 25,511.12 points.

The Dow Jones Industrial Average fell 394.01 points (0.75%) to 52,158.96 points.

The energy sector was the biggest gainer among the major S&P 500 sectors, benefiting from a sharp rise in crude oil prices amid signs of escalating combat operations in the war with Iran.

Chip crisis threatens budget phones: rising costs push up prices

Strong start to corporate earnings season

The second-quarter earnings season is still in its early stages, with 49 S&P 500 companies having reported results so far. According to LSEG data, over 90% of these companies beat market expectations.

According to LSEG data, analysts now expect aggregate annual earnings growth for S&P 500 companies of 26%, up from expectations of 19.2% on April 1.

Netflix shares fell after the company disclosed weaker-than-expected forecasts, raising doubts about the sustainability of strong content growth momentum.

Uber Technologies shares fell after the ride-sharing company announced its intention to acquire German delivery hero in a deal worth nearly $15 billion.