Stock Market Falls as Semiconductor Rally Cools; Inflation Data Supports AI Valuations
U.S. stocks declined Friday with the S&P 500 losing 1.01% and Nasdaq dropping 1.4% as investors questioned whether the AI-driven semiconductor surge has justified current valuations. Energy stocks rebounded while chip stocks faced profit-taking pressure following a strong first half of 2026.
Markets Fall Amid Semiconductor Reckoning
The broad market index lost 1.01% to end at 7,457.69, while the Nasdaq Composite dropped 1.4% to 25,520.24 as tech stocks came under scrutiny. The Dow Jones Industrial Average fell 406.55 points, or 0.77%, to close at 52,146.42.
Chip Sector Under Pressure
The VanEck Semiconductor ETF (SMH) fell more than 4%, extending pressure on chip stocks as investors questioned whether the AI-driven rally has pushed valuations beyond what fundamentals can support. The major stock benchmarks notched weekly losses, with the S&P 500 off 1.6%, while the Nasdaq slid 2.9%.
Meta-Anthropic Talks
Meta is in talks to rent computing power to artificial intelligence giant Anthropic, according to a New York Times report. The agreement could be worth as much as $10 billion. Shares of Meta rose from their lows of the day after the report, but remained down more than 3.5% on the session.
Defense Boom Continues
While tech struggled, defense stocks thrived. Swedish defense company Saab beat earnings expectations in the second quarter, as booming demand for military equipment propelled the fighter jet maker to another quarter of record orders backlog. The total backlog amounted to 317.7 billion Swedish crowns, up from 197.6 billion a year ago. It comes as European governments ramp up defense spending, boosting the region's companies.