Synopsis
Wall Street finished lower on Friday, with AI chip stocks seeing a significant slowdown while Moderna and other health care companies surged. Investors are weighing the long-term potential of AI against concerns about the substantial investments required for data centers. Inflationary pressures, fueled by energy prices and chip costs, remain a concern, affecting companies like Apple and sparking talk of possible interest rate hikes.
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P.A.The PHLX chip index fell, highlighting the recent volatility among AI-related chipmakers that has fueled much of Wall Street’s gains in recent years. Wall Street ended lower on Friday, with a sharp decline in AI-related chip stocks and strong gains in Modern and other health care actions.
The PHLX chip index fell, highlighting the recent volatility among AI-related chipmakers that has fueled much of Wall Street’s gains in recent years. While some investors remain optimistic about AI’s potential to generate higher profits, others fear that the massive spending on building AI data centers will take too long to pay off.
“It’s too early to conclude that a major correction is brewing in the technology sector, but what I would say is that the questions around profitability and capital expenditures certainly won’t go away,” said David Stubbs, chief investment strategist at AlphaCore Wealth Advisory.
Stubbs also warned that Wall Street could be vulnerable to signs that U.S. companies may not be able to meet investors’ high profit expectations. Apple partly rebounded from a selloff Thursday, when it raised prices for the iPad and MacBook, blaming soaring costs of memory and storage chips.
Moderna hit its highest level since 2024 after the drug developer held an investor event and showcased its pipeline. U.S. inflation topped 4% in May, data showed Thursday, as the war in Iran pushed up energy prices, keeping alive the possibility of a Fed rate hike.
While oil prices have fallen sharply as tensions in the Middle East have eased, Apple’s recently announced price hikes suggest inflation remains a concern, said Art Hogan, chief market strategist at B. Riley Wealth.
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“We saw similar dynamics during the pandemic, when supply chain disruptions limited access to semiconductors. Today we are seeing a comparable supply shock, this time driven by memory, that is creating new inflationary pressure,” Hogan said.
According to preliminary data, the S&P 500 lost 19.81 points, or 0.27%, to end at 7,337.68 points, while the Nasdaq Composite lost 121.72 points, or 0.48%, to 25,236.88. The Dow Jones Industrial Average fell 125.78 points, or 0.23%, to 51,794.84. A report that OpenAI was considering delaying its public debut until next year also weighed on risk sentiment around AI stocks.
SpaceX shares were mixed for much of the session. Passively managed index funds must buy billions of dollars worth of stocks before inclusion in Russell indexes.
At the same time, concerns over interest rates persisted, with traders pricing in a 25 basis point rate hike and a nearly 27% chance of another by the end of the year, according to data compiled by LSEG. A survey shows that U.S. consumer confidence has rebounded after hitting record levels in June, even as households remain worried about the high cost of living. ABOUT Semiconductor fell after agreeing to acquire Synaptics in an all-stock deal valued at about $7 billion.
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