US stocks opened lower on Friday as investors continued to rotate out of technology stocks, with chipmakers facing renewed selling pressure despite strong recent earnings and upbeat demand forecasts.
The Dow Jones Industrial Average was down 207 points points while the Nasdaq Composite dropped 0.95%. The S&P 500 declined 0.61%.
The latest weakness comes after a strong quarter for semiconductor stocks, as investors increasingly question lofty valuations and the sustainability of heavy spending on artificial intelligence infrastructure.
Chip stocks slide despite strong earnings
Semiconductor stocks led the premarket declines. Shares of Micron Technology fell more than 5.8% after soaring over 15% in the previous session following better-than-expected quarterly results and forecasts.
Advanced Micro Devices and Intel each declined more than 3.5%, while Nvidia lost about 1.7%. Oracle also dropped 0.38%.
The selloff reflects growing investor concerns about who ultimately bears the costs associated with massive investments in artificial intelligence infrastructure.
A New York Times report that OpenAI is considering delaying its initial public offering until next year also weighed on sentiment.
The report raised concerns about “sustainability of their infrastructure spending given the delay in funding from the capital markets,” wrote JPMorgan traders in a note.
Technology shares had already come under pressure in Thursday’s session.
Apple plunged 6% after announcing price increases for iPads and MacBooks due to rising memory and storage costs. Microsoft also declined after raising prices on its Xbox gaming consoles.
Apple recovered modestly on Friday, rising about 0.7%.
Inflation concerns and rate fears add pressure
The market’s concerns extend beyond technology spending. Fresh inflation data and changing expectations for Federal Reserve policy have also weighed on sentiment.
Data released on Thursday showed US inflation climbed above 4% in May for the first time in three years, driven by higher energy prices linked to tensions in the Middle East.
Although oil prices have recently retreated as geopolitical tensions eased, investors remain concerned that higher semiconductor costs could once again fuel broader inflationary pressures.
Interest rate concerns remain elevated, with traders pricing in one 25-basis-point rate increase and a nearly 27% chance of another hike before year-end, according to LSEG data.
Global technology selloff spreads across markets
The weakness in technology stocks extended beyond the United States.
SoftBank Group, a major backer of OpenAI, plunged more than 12% in Asia.
South Korea’s Kospi dropped 5.81%, while Japan’s Nikkei 225 declined 4.15%. Hong Kong’s Hang Seng Index and China’s CSI 300 also posted losses.
European stocks moved lower as well, with the pan-European Stoxx 600 falling 1%.
Among individual movers, Synaptics fell 0.95% after ON Semiconductor agreed to acquire the company in an all-stock deal valued at about $7 billion. Shares of ON Semiconductor fell 19.42%.
Investors are also preparing for heavy trading activity tied to Russell index changes, including the reclassification of several megacap stocks and the fast-track addition of SpaceX to the Russell 1000.
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