AI Spending Fears and Oil Spike Trigger Late-Week Selloff in U.S. Stocks

AI spending scare and oil shock drive the week’s biggest U.S. stock move

U.S. stocks were hit by a broad pullback in semiconductor and other AI-linked names late in the week, as investors reassessed how much capital is being poured into artificial intelligence infrastructure. At the same time, oil’s move back above $80 a barrel added another source of pressure for equity markets.

The sharpest action was in chips. CNBC reported that semiconductor stocks tumbled, with the iShares Semiconductor ETF (SOXX) pulling back more than 10% week to date and the VanEck Semiconductor ETF (SMH) sliding nearly 9%. Nasdaq said the selling came as investors weighed second-quarter earnings and a fresh batch of data, with the Nasdaq Composite, S&P 500 and Dow all closing lower on Thursday.

The AI trade also came under renewed scrutiny after reports that TSMC paired record profit with a much larger U.S. manufacturing investment plan, while ASML beat earnings estimates and raised guidance again. Even so, market commentary said the news added to concern over how much is being spent to build out U.S. AI capacity, rather than calming it.

Oil added a separate drag. Sources said prices climbed back above $80 a barrel as hostilities between the U.S. and Iran intensified, raising questions about inflation and the outlook for tanker traffic through the Strait of Hormuz. The Washington Post reported that Brent crude jumped another 4.6% on worries about the war with Iran, while the Nasdaq story said retail sales rose 0.2% in June, above expectations, underscoring a mixed macro backdrop.

Earnings season did provide some offsets. Nasdaq highlighted stronger-than-expected results from UnitedHealth Group (UNH), Abbott Laboratories (ABT) and J.B. Hunt Transport Services (JBHT), but those gains were not enough to prevent the broader market from ending the session lower.

The result was a week in which the major averages were pressured even as earlier inflation data had been softer than expected. A weekly recap said U.S. indexes reached fresh records earlier in the week before sentiment deteriorated late as chip stocks weakened and rate-cut optimism met renewed inflation and geopolitics concerns.

What to watch

Watch whether the semiconductor selloff extends beyond this week’s move in SOXX and SMH, and whether investors continue to punish AI names tied to heavy spending plans. The next major market test is whether oil stays elevated and whether upcoming earnings from large-cap tech and industrial companies reinforce or ease concerns about margins, capex and demand.