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The U.S. stock market took a hard hit on Friday, capping off a volatile week that saw optimism in artificial intelligence turn sharply into fear. Investors unloaded shares in leading chipmakers and technology giants as concerns escalated that AI spending has run too hot, too fast. The S&P 500 fell 0.7 percent, while the Nasdaq Composite dropped 1.3 percent, sending major indexes on track for a losing week.

Semiconductor stocks were at the center of the storm. The iShares Semiconductor ETF and VanEck Semiconductor ETF both plunged more than 2 percent, adding to their weeklong slide. Industry heavyweights like Applied Materials, LAM Research, Intel, and KLA Corporation all lost 3 to 4 percent, while Nvidia—once the darling of the AI craze—slipped over 1 percent. The semiconductor sector as a whole has now dropped more than 9 percent this week, its third losing week in the past month.

One factor spooking investors: growing competition from China. A new model from Chinese startup Moonshot AI reportedly rivals top U.S. offerings, intensifying pressure on major American players and raising questions about how much more they can keep spending to stay ahead. Edward Jones strategist Angelo Kourkafas said the signs point to “fatigue” in the AI sector, with investors starting to punish companies for overspending. He argued that the current volatility shows “the AI theme is maturing rather than breaking.”

The slump wasn’t confined to semiconductors. Streaming giant Netflix cratered more than 8 percent after its forecast disappointed Wall Street, renewing fears that streaming growth is grinding to a halt. The selloff in these once high-flying tech names served as a reminder that even market leaders are vulnerable when investors rethink valuations after a period of hype.

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While tech grabbed the headlines, geopolitical tensions added to the anxiety. Oil prices jumped past $81 a barrel for U.S. crude and $86 for Brent as fighting between the U.S. and Iran intensified. Kuwait reported an Iranian attack on critical infrastructure, while U.S. Central Command confirmed its sixth straight night of strikes on Iran’s military targets. Tehran retaliated with claims of its own strikes on U.S. forces in Syria and Bahrain. The resulting instability threatens shipping through the Strait of Hormuz, through which roughly one-fifth of global oil flows.

Not all the news was bad. Defensive names like Berkshire Hathaway rose more than 1 percent as investors rotated into safer, more stable companies. Optimism grew that Warren Buffett’s conglomerate had quietly ramped up share buybacks in the last quarter. Barron’s estimated Berkshire might have repurchased between $5 billion and $11 billion worth of its own shares, a move that offered reassurance amid the turbulence in high-growth tech.

Economic data added both confusion and hope. Consumer sentiment improved 10 percent in June, according to the University of Michigan, reflecting easing inflation and lower gas prices. Inflation expectations for the next year slipped to 4.2 percent, their lowest level since March. Still, sentiment remains far below last year’s levels, underscoring the strain of elevated prices and uncertainty over future costs.

Federal Reserve officials were not taking victory laps. Cleveland Fed President Beth Hammack said business leaders were increasingly anxious about energy and supply chain pressures, alongside surging insurance costs and the resource demands of AI data centers. While she avoided calling for immediate rate hikes, her words echoed fresh concern that inflation is far from tamed. Dallas Fed President Lorie Logan earlier called for “modestly higher” interest rates, warning that the latest drop in consumer and wholesale prices does not erase the long-term threat of inflation.

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In corporate news, Apple reclaimed its crown as the most valuable U.S. company, overtaking Nvidia as the chipmaker’s stock fell 3.5 percent. Apple shares ticked slightly higher in contrast, reminding investors that steady balance sheets sometimes win out when volatility hits.

Data on import inflation painted a troubling picture. Import prices surged 0.3 percent in June and a steep 7.1 percent for the year—far above expectations—due in part to rising costs on Chinese goods, which jumped 0.9 percent. The spike suggests inflationary pressures remain stubborn despite easing energy prices.

Adding to the tech carnage, robotics company Intuitive Surgical sank 9 percent after noting that the expiration of enhanced Obamacare subsidies hurt demand for its robotic surgeries. Despite beating earnings estimates, the company warned growth could be limited by healthcare cost constraints. GSK, meanwhile, slipped 2 percent after halting development of a chronic cough drug that failed in late-stage trials.

Treasury yields fell slightly as investors sought safety amid Middle East turmoil. The 10-year Treasury yield dropped to 4.525 percent, and the 2-year yield settled near 4.12 percent, reflecting modest moves into bonds. Gold inched higher, up 0.6 percent Friday morning, though it remains down roughly 3 percent for the week after earlier selloffs.

The carnage was contagious overseas. Asian and European chip stocks were hammered, with Japan’s SoftBank and Tokyo Electron both sinking 9 percent, while Holland’s ASML and France’s STMicroelectronics fell more than 4 percent. Investors globally appear to be repricing what the AI boom is worth—and what risks come with it.

Safe-haven buying into gold and Treasuries underscored how quickly investor sentiment can change when exuberance meets uncertainty. Technology may still drive the next decade of growth, but this week showed the market is no longer impressed by spending sprees or lofty promises without tangible results. Discipline, not hype, is beginning to set the tone.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.