Traders work on the floor of the New York Stock Exchange (NYSE) on July 09, 2026, in New York City.

Spencer Platt | Getty Images

Stocks fell on Friday as mounting jitters over artificial intelligence spending dragged tech lower, putting the major averages on pace for a losing week.

The Nasdaq Composite dropped 1.8% as tech stocks came under scrutiny. The Dow Jones Industrial Average slipped 519 points, or 1%, while the S&P 500 lost 1.2%.

The iShares Semiconductor ETF (SOXX) and the VanEck Semiconductor ETF (SMH) were both down more than 3%. Shares of Applied Materials and LAM Research declined around 5%, while Intel, KLA Corporation and Arm were around 4% lower. Micron lost more than 2%, and Nvidia lost more than 3%.

Those losses added to declines seen in the previous session, which were also led by semiconductors. Adding to that downbeat sentiment, Chinese startup Moonshot AI unveiled a new model that it says narrows the gap with the top offerings in the U.S.

The SMH is down 10% for the week, on pace for its third weekly decline in four weeks. The major stock benchmarks are also down week to date, with the S&P 500 off by nearly 2%, while the Dow and Nasdaq have slipped more than 1% and more than 3%, respectively.

In a note on Friday morning, strategists at BBH said investors are "increasingly questioning the sustainability of the ongoing AI capital expenditure boom."

"The [Bank for International Settlements] annual economic report cautions that boom-bust cycles are a regular feature of past investment surges driven by transformative technologies," they said.

Meanwhile, Barclays strategists appeared unperturbed by the tech volatility in a Friday note.

"While Tech volatility may persist in the near term, we believe that the reset in positioning should ultimately prove healthy, creating more attractive entry points for long-term investors targeting the structural AI theme," they said.

Alongside chips, shares of Netflix were a major laggard Friday, falling more than 10% after the company posted second-quarter results that were roughly in line with expectations as well as a disappointing earnings forecast.

Further escalations in the U.S.-Iran war also remained in focus, with oil prices rising in their wake. U.S. West Texas Intermediate crude futures were last trading above $81 per barrel, while international benchmark Brent crude futures were above $86.

Kuwait said on Friday that Iran attacked a power and water desalination plant, and U.S. Central Command said overnight that it had completed its sixth consecutive evening of strikes against Iran, hitting dozens of military targets, including logistics infrastructure and maritime capabilities.

Iranian officials also claimed on Friday to have targeted U.S. military forces in Syria and Bahrain, widening Tehran's attacks further across the Middle East.

This comes as the fragile truce reached last month has fractured, once again disrupting energy flows through the strategically vital Strait of Hormuz, which typically handles around 20% of the world's oil traffic.