Wall Street slides as AI-related chip stocks retreat

U.S. equity futures pointed to a weaker finish to the week on Friday, with the S&P 500 down 0.8%, the Dow Jones Industrial Average off 0.5% and Nasdaq futures falling 1.6%. Major chipmakers such as Micron, Nvidia, Broadcom, Qualcomm and Intel each slipped between 2% and 3% in pre-market trading.

Investors have been trimming positions in AI-linked equities after a prolonged rally, citing doubts that demand for memory and processors will match earlier expectations. > "Now investors are taking profits from the first-half winners and moving toward areas that were left behind," said Stephen Innes of SPI Asset Management.

The market reaction was amplified by the launch of a low-cost, open-source AI model, Kimi K3, from Chinese startup Moonshot, which analysts say could curb demand for high-end chips that have benefited from AI growth.

SpaceX shares dropped 4.5% after a test launch of its Starship vehicle was aborted when several engines failed to ignite. Netflix fell more than 11% after its quarterly outlook missed analysts' forecasts, despite reporting better-than-expected second-quarter profit.

In Asia, Taiwan’s market fell 6.5% following TSMC’s announcement of a $100 billion investment in U.S. fabs, with TSMC itself down 7.3%. Japan’s Nikkei slipped 4% as memory-chip maker Kioxia fell 16.1% and equipment suppliers Tokyo Electron and Advantest dropped 8.2% and 7.2% respectively. SoftBank Group lost 9%.

Hong Kong’s Hang Seng declined 2% and Shanghai’s Composite fell 3.1%, reaching its lowest level in nearly a year. Shares of Knowledge Atlas Technology (Z.ai) plunged 28.5%.

Australian equities slipped 0.5%, while European markets were mixed, with Germany’s DAX down 0.5%, France’s CAC 40 down 0.7% and Britain’s FTSE 100 unchanged.

Separately, the United States expanded airstrikes against Iranian infrastructure, raising oil prices. Brent crude rose about 2% to $85.95 a barrel and U.S. West Texas Intermediate climbed 2.3% to $80.88.