The tech-heavy Nasdaq fell on Friday as investors sold chip stocks over mounting concerns regarding massive capital expenditure on artificial intelligence ahead of upcoming megacap earnings reports. According to market data, the Nasdaq Composite dropped 157.35 points, or 0.63%, to close at 24,980.34, while the broader S&P 500 ended nearly flat, gaining 3.74 points, or 0.07%, to finish at 7,413.30. Meanwhile, the Dow Jones Industrial Average rose 235.87 points, or 0.46%, to reach 51,947.52, supported in part by falling oil prices.
AI Spending Jitters Weigh on Chip Stocks and Nasdaq
Investor enthusiasm for artificial intelligence growth has cooled as major technology firms ramp up spending. According to Peter Andersen, CEO of Andersen Capital Management, market participants are questioning the timeline for returns on these heavy financial outlays. Alphabet’s late-Wednesday announcement detailing plans to increase capital spending while burning cash triggered broader anxiety across the sector. Andersen noted that the initial fear of missing out has transformed into a fear of massive overbuilding, leaving investors wondering how much more patient they must be before seeing actual profits.
Weighing further on the sector, Intel forecast quarterly profit and revenue above Wall Street estimates late on Thursday while outlining plans to increase spending over the next two years. Despite the positive forecast, Intel shares sank on Friday, dragging the Philadelphia SE Semiconductor index down alongside other major chipmakers.
Megacap Earnings Focus and Real Estate Outperformance
Market attention remains fixed on upcoming quarterly results from megacap technology giants Microsoft, Amazon.com, Meta, and Apple Inc. As these reports approach, technology indexes underperformed the broader market on Friday, with the S&P 500 technology index acting as the biggest drag on the benchmark index.
In contrast, the S&P 500 real estate sector outperformed during the session. Digital Realty Trust led the sector’s gains after the company raised its full-year forecast for funds from operations, providing a bright spot for investors navigating a volatile technology landscape.
Crude Oil Slumps Amid Profit-Taking and Geopolitical Headlines
Crude oil futures fell more than 3% on Friday as traders booked profits following a massive rally over the preceding five sessions. The downward pressure on oil also followed reports from sources indicating that China was pushing to resume stalled U.S.-Iran peace talks. These energy market movements unfolded while U.S. missiles struck targets across Iran following a vow from President Donald Trump of major military punishment for Tehran and its Houthi allies in Yemen.
According to Peter Andersen, fluctuations in crude prices directly drive financial markets because oil swings ultimately impact consumer and corporate spending.
U.S. Tariffs and Economic Activity Data
The Trump administration implemented new tariffs ranging from 10% to 12.5% on goods from 60 trading partners, citing lax enforcement of forced-labor bans. This policy action coincided with the expiration of a temporary 10% global tariff.
On the economic front, data released on Friday showed that activity in the U.S. services sector accelerated in July, supported by spending around the Independence Day holiday and the FIFA World Cup. Conversely, growth in the manufacturing sector slowed to its weakest pace since March. Among individual equities, oilfield services firm SLB saw its shares climb after reporting second-quarter profits that beat analyst expectations.
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