US Stocks Slide as Chip Shares Enter Bear Market; China’s Kimi K3 Intensifies AI Competition
Dragon Media News Desk
US stocks closed sharply lower on Friday as a deepening correction in semiconductor shares pushed all three major indices into daily and weekly losses.
The technology-heavy Nasdaq Composite fell 361.70 points, or 1.4 percent, to close at 25,520.24. The S&P 500 declined 76.08 points, or 1.01 percent, to 7,457.69, while the Dow Jones Industrial Average dropped 406.55 points, or 0.77 percent, to finish at 52,146.42.
Ten of the 11 sectors in the S&P 500 ended lower. Communication services and consumer discretionary stocks suffered the heaviest losses. Energy was the only sector to advance, supported by higher crude oil prices amid escalating tensions between the United States and Iran.
The Philadelphia Semiconductor Index entered a technical bear market after falling 20.2 percent from its record closing level on June 22. Although the index has declined by more than 18 percent in July, it remains up nearly 65 percent since the beginning of the year.
Semiconductor shares have come under sustained pressure as investors question high valuations, massive spending on artificial intelligence infrastructure and the future earnings needed to justify those investments. Nvidia, AMD, Broadcom and Intel all ended Friday’s session lower.
Meanwhile, Chinese artificial intelligence company Moonshot AI unveiled Kimi K3 on Friday. The company described the 2.8-trillion-parameter system as the world’s largest open-weight AI model.
Moonshot said Kimi K3 was developed for advanced reasoning, long-duration coding tasks and knowledge-intensive work. Independent evaluations have reportedly shown competitive performance against some leading American models, although analysts caution that model size alone does not guarantee superior results.
Chinese companies are increasingly releasing powerful open-weight models at comparatively lower costs, prompting renewed debate over the durability of the technological advantage held by major US firms.
The launch of Kimi K3 cannot be treated as the sole cause of the semiconductor sell-off. However, it has reinforced investor concerns over whether the enormous sums being committed to expensive AI infrastructure will generate sufficient returns.
Netflix shares fell about 7.3 percent after the company issued cautious revenue guidance for the third quarter. Concerns focused on whether strong content growth and subscriber engagement could be sustained over the longer term.
SpaceX shares also declined by more than 5 percent, falling further below the company’s recent initial public offering price of $135. The decline followed the automatic cancellation of the 13th Starship test flight shortly before launch on Thursday because of an engine-related problem.
The company said it would replace two Raptor engines before attempting another test next week.
Economic indicators presented a mixed picture. The University of Michigan’s preliminary consumer sentiment index rose from 49.5 in June to 54.4 in July, its highest level since February and above economists’ forecast of 51.
However, inflationary pressure on American households has not disappeared. Consumer prices increased by 3.5 percent in June compared with a year earlier, while real average hourly earnings rose by only 0.1 percent over the same period.
The figures indicate that household purchasing power remains constrained despite the improvement in consumer confidence.
Friday’s decline does not necessarily mean that investor enthusiasm for artificial intelligence has ended. It does, however, suggest that markets are beginning to demand a clearer relationship between high valuations, rising capital expenditure and actual earnings.
The rapid progress of Chinese AI companies, stretched valuations in the semiconductor industry and limited household purchasing power in the United States are likely to influence the direction of markets in the coming week.
