US Stocks Close Lower: Chip Stocks Under Pressure, Nasdaq Drops 1.4%, SOX Enters Bear Market

US stocks closed lower on Friday (17th) as semiconductor stocks continued to face selling pressure. A Chinese AI startup's launch of a large open-source AI model sparked market concerns over intensifying AI competition, weighing on chip stocks. Netflix's earnings forecast failed to ease investor worries about slowing growth, dragging down major indices, all of which ended the week in the red.

The Dow Jones Industrial Average dropped over 406 points, the S&P 500 Index fell more than 1%, the Nasdaq Composite Index declined 1.4%, and the Philadelphia Semiconductor Index (SOX) fell 1.63%, entering bear market territory—indicating chip stocks have fallen at least 20% from recent highs.

For the week, the S&P 500 fell over 1.5%, the Nasdaq plunged about 2.9%, and the Dow declined nearly 1%.

Chinese AI startup Moonshot AI launched its latest model, Kimi K3, claiming it rivals powerful offerings from US-based OpenAI and Anthropic. Market concerns grew that intensifying competition from Chinese open-source models could further erode returns on massive AI investments by US tech giants, dragging down chip stocks.

VanEck Semiconductor ETF (SMH-US) plummeted 7% this week, marking its third weekly decline in the past four weeks. SanDisk (SNDK-US) plunged over 24% for the week, Micron (MU-US) fell 8.72%, while SK Hynix ADR (SKHY-US) rose 0.92%.

Performance among the 'Magnificent Seven' tech giants was mixed. Apple (AAPL-US) rose about 6%, Microsoft (MSFT-US) gained over 3%, and Amazon (AMZN-US) closed up 0.85%.

In contrast, Nvidia, Alphabet (GOOGL-US), and Meta (META-US) each fell about 3%, while Tesla (TSLA-US) plunged about 6%.

On the economic front, the preliminary University of Michigan consumer sentiment index showed improved US consumer confidence about the economic outlook, as gasoline prices declined.

Additionally, escalating US-Iran tensions further increased market volatility. West Texas Intermediate (WTI) crude futures surged 4.5% on Friday, closing at $82.49 per barrel; Brent crude futures rose 4.6%, closing at $88.10 per barrel.

US Central Command stated that US forces had completed their sixth consecutive night of airstrikes on Iran, targeting dozens of military objectives, including logistics infrastructure and maritime military capabilities. Kuwait reported that Iran attacked a power and desalination facility in the country on Friday.

US stock market performance on Friday (17th):

Dow Jones Industrial Average: down 406.55 points (0.77%), closed at 52,146.42 Nasdaq Composite Index: down 361.70 points (1.40%), closed at 25,520.24 S&P 500 Index: down 76.08 points (1.01%), closed at 7,457.69 Philadelphia Semiconductor Index: down 193.61 points (1.63%), closed at 11,673.89 NYSE FANG+ Index: down 352.26 points (2.01%), closed at 17,173.89

Key individual stocks:

Most of the tech 'Big Five' in the NYSE FANG+ Index declined. Meta (META-US) fell 2.79%; Apple (AAPL-US) rose 0.14%; Alphabet (GOOGL-US) fell 2.17%; Microsoft (MSFT-US) fell 1.82%; Amazon (AMZN-US) fell 1.06%.

Philadelphia Semiconductor Index stocks were broadly weak. AMD (AMD-US) fell 1.03%; Broadcom (AVGO-US) fell 0.97%; Nvidia (NVDA-US) fell 2.21%; Applied Materials (AMAT-US) plunged 5.57%; Qualcomm (QCOM-US) rose 0.69%; Micron (MU-US) fell 0.50%.

Taiwanese ADRs mostly declined. TSMC ADR (TSM-US) fell 2.77%; ASE ADR (ASX-US) fell 2.78%; UMC ADR (UMC-US) plunged 4.67%; Chunghwa Telecom ADR (CHT-US) rose 0.35%.

Company news:

Nvidia (NVDA-US), the AI leader, closed down 2.21% at $202.81 per share, with its market cap dropping to about $4.91 trillion, below Apple's $4.9 trillion, losing its title as the world's most valuable company.

Due to an underwhelming outlook, Netflix (NFLX-US) plunged over 7% to $68.95 per share. The company's Q3 revenue forecast missed Wall Street expectations, and it noted the entertainment market remains in a 'rapidly changing and highly competitive' environment.

Meta (META-US) closed down 2.79% at $646.01 per share, after briefly plunging 5.7% during the session. The New York Times reported Meta is negotiating a roughly $10 billion computing power leasing deal with Anthropic, under which Anthropic would pay Meta monthly fees over two years.

If finalized, the deal would allow Meta to generate new revenue by leasing data center computing power, recouping some AI infrastructure investment costs, and competing with emerging cloud computing players like CoreWeave (CRWV-US) and Nebius (NBIS-US).

SpaceX (SPCX-US) fell 5.43% to $123.99 per share, marking its sixth consecutive trading day of losses. The Wall Street Journal reported SpaceX is in talks with the Pentagon to provide data center computing power to help the US Department of Defense run AI models, with a potential contract worth up to several billion dollars. The news briefly helped the stock recover some losses.

Wall Street analysis:

Market confidence in AI-related trades is being tested. The tech stock rally from March lows was initially driven by AI themes, but as tech companies significantly increase spending on data centers and computing infrastructure, investors are questioning when these investments will translate into profits.

Bank of America analysts noted the SOX index has fallen about 13% over the past 30 days, driven by concerns over capital expenditure expectations, profit-taking, and corporate spending. However, BofA maintains this correction won't disrupt the semiconductor industry's multi-year growth trend driven by capital expenditure growth.

Angelo Kourkafas, Senior Investment Strategist at Edward Jones, said the claim that Chinese open-source models can now compete with leading products from Anthropic and OpenAI has reignited market concerns over tech companies' aggressive spending.

He noted that AI end-users are becoming more price-sensitive, and the market is now punishing companies that increase spending too aggressively. However, recent volatility appears more like the AI theme maturing rather than the overall growth trend being broken—a normal phase in the evolution of a major investment cycle.

Beyond AI spending concerns, rising US-Iran tensions and soaring oil prices are adding further pressure to markets.

David Wagner, Head of Equities at Aptus Capital Advisors, said the latest oil price surge could trigger investor panic, but current prices remain within normal volatility ranges. He remains bullish on the broader market but expects future market volatility to increase further.

(All figures are updated as of publication time; actual prices may vary.)