Stocks were set to post their first weekly losses in three weeks on Friday as concerns about the sky-high valuations of artificial intelligence companies prompt investors to pull back.
The Nasdaq Composite, which closely tracks the biggest technology companies, could record a drop of more than 4.5% 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 is also poised to post a loss of more than 2.7% this week, its worst since May. The broad-based index would also break its streak of three weeks of gains. The S&P, Nasdaq and Dow Jones Industrial Average were all down for the day as of 1:30 p.m. ET, although they were well off their lows.
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 $1 trillion of market value.
Nvidia and AMD each have dropped more than 11% this week, while Oracle, which provides cloud computing services for AI software developers, has dropped about 10%. Meta is down 7% and Microsoft has tumbled 4% this week, as of Friday morning.
Super Micro Computer, which sells servers and equipment that cloud computing providers use for AI, has plunged 25% this week and is the worst performing stock in the S&P 500 this week.
The S&P 500 technology sector as a whole is by far the worst performing sector this week, shedding 6%, double the loss of the second worst sector this week.
Not all tech stocks have fared so poorly though. Apple, the second largest company in the world behind Nvidia, is set to end the week flat, while Alphabet and Amazon have only declined around 1.5% this week.
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 at play, 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.
