Stocks posted their first weekly losses in three weeks on Friday as concerns about the sky-high valuations of artificial intelligence companies prompted investors to pull back.
The Nasdaq Composite, which closely tracks the biggest technology companies, recorded a drop of 3% this week, its worst since the global market sell-off in April fueled by the rollout of President Donald Trump’s "Liberation Day" tariff policies.
The S&P 500 posted a loss of 1.6% this week. The broad-based index broke its streak of three weeks of gains.
Stocks sharply retreated from the lows of the day after Senate Democrats offered a new plan to end the government shutdown. The Dow Jones Industrial Average and the S&P finished slightly positive for the day, while the Nasdaq closed down.
For the year, the Nasdaq and S&P are still holding on to substantial double-digit gains.
Markets have been led lower primarily by companies connected to the artificial intelligence boom. Collectively, the drop this week in shares of Microsoft, Nvidia, AMD, Palantir, Oracle and Instagram owner Meta Platforms has erased more than $820 billion of market value.
Nvidia declined 7%, while Oracle, which provides cloud computing services for AI software developers, dropped 8.8%, as did chipmaker AMD. Meta and Microsoft tumbled around 4% this week.
Super Micro Computer, which sells servers and equipment that cloud computing providers use for AI, plunged 23% this week and was the worst performing stock in the S&P 500 for the five-day frame.
The S&P 500 technology sector as a whole is by far the worst performing sector this week, shedding 4.2%.
Not all tech stocks have fared so poorly though. Apple, the second largest company in the world behind Nvidia, and Alphabet each ended the week down just 0.7%, while Amazon posted a fractional gain.
The sell-off started Tuesday, after government contractor and AI developer Palantir reported earnings. Fears that it was too highly valued led to the stock plunging in the following days and dragging its peers lower.
Two top Wall Street CEOs also warned that a market pullback could be on the horizon.
Nvidia CEO Jensen Huang further fueled fears about the U.S. tech sector, telling the Financial Times on Thursday that China would likely “win the AI race.” He later clarified, writing that “China is nanoseconds behind America in AI.”
On Friday, reporters asked Trump if he was concerned about an "AI bubble."
"No, I love AI," Trump said. "We're leading China, we're leading the world."
Other factors could be driving the market losses, too.
On Friday, consumer sentiment tumbled to near record low levels in the widely read University of Michigan’s survey of consumers. “With the federal government shutdown dragging on for over a month, consumers are now expressing worries about potential negative consequences for the economy,” survey director Joanne Hsu said.
The government shutdown has led to a lack of official data points for the market to trade on. The jobs report that was scheduled for release Friday was not published, nor was last month’s report. Other key economic indicators have also not been released due to the 37-day shutdown.
That has led investors to rely more heavily on corporate earnings reports and alternative data.
One of those alternative datapoints, ADP’s private employment report, said that companies added only 42,000 jobs last month. A report from research firm Challenger, Gray & Christmas also showed that announced job cuts from U.S.-based employers reached the highest level for any October in 22 years.
