Nasdaq Plummets as Oil Shock Reaccelerates Inflation Fears; Tech Stocks Face AI Spending Scrutiny

Nasdaq Plummets as Oil Shock Reaccelerates Inflation Fears; Tech Stocks Face AI Spending Scrutiny​

The technology-heavy Nasdaq 100 Index experienced a significant decline, capping its first back-to-back weekly loss since late March. The gauge dropped 1.15% after being pulled down by surging oil prices and widespread selloffs among tech stocks that had previously benefited from the AI investment boom.

Amid global market jitters, the S&P 500 Index managed a slight positive movement, closing up 0.0497%. The Dow Jones Industrial Average also saw gains, rising by 0.5% for the day.

Chip Sector Correction and Tech Jitters Intensify​

The specialized tech sectors faced intense pressure, with the Philadelphia Stock Exchange Semiconductor Index sliding another 4.25% on Friday. This decline puts the sector on track for its worst month since June 2022, mirroring a near 17% drop recorded in July.

Key tech stocks continued to see volatility. Intel Corp. fell 7.89% despite posting a blockbuster revenue forecast after reversing an initial advance. SanDisk Corp., which had performed well throughout 2026, slumped by 10.79%, becoming the biggest decliner in the S&P.

The broader Magnificent Seven basket saw mixed results; while it finished flat for the week, its weekly drop of 5.7% was cited as its worst since early June. Meanwhile, Apple Inc. rose 3.53%.

Macro Concerns and Federal Reserve Outlook​

Traders are intensely focused on next week’s Federal Reserve meeting amid mounting economic pressures. Rising oil prices have boosted concerns that the Fed might raise interest rates as soon as next week. This dynamic, coupled with geopolitical conflict in the Middle East, has created a turbulent trading environment.

Scott Ladner, Chief Investment Officer at Horizon Investments, noted the instability, stating that while Middle Eastern hostilities were ongoing, the spike in bond yields after inflation fears and crude price spikes had spooked traders. He suggested that stocks could be kinder next week, contingent on earnings supporting high valuations.

AI Spending Scrutiny and Industry Reactions​

The artificial-intelligence trade is facing increasing scrutiny over its sustainability. John Cunnison, Chief Investment Officer at Baker Boyer Bank, pointed out that while AI capex spending is accelerating rapidly, with Alphabet now reporting negative free cash flow, this raises fears that companies might be using debt issuance to fund operations.

In related corporate news, Alphabet Inc. rose 0.645% after recovering from an earlier 7.1% decline, as increased capital-expenditure outlook fueled anxieties about AI spending sustainability. Tesla Inc. fell 2.08% after plunging nearly 15% on Thursday following a profit tumble.

Sector Performance and Key Stock Movers​

The market saw varied performance across sectors, with 10 out of the 11 S&P sectors rising on Friday. Real Estate and Materials led gains while technology lagged significantly. Digital Realty Trust Inc., a real estate technology company, jumped 11.01% after TD Cowen upgraded its recommendation from hold to buy amid record demand for data centers.

Despite overall market nervousness, some companies delivered massive boosts. Tenet Healthcare Corp. soared 17.17%, marking its biggest gain since February, following better-than-expected second-quarter results and boosted profit guidance.

Conversely, American Express Co. fell 4.30% after reporting second-quarter revenue and net card fees that fell slightly below expectations. CH Robinson Worldwide Inc. saw a sharp decline of 9.25% amid a lawsuit verdict against the freight broker.