US Stocks Sell Off as Semiconductors Weigh on Nasdaq

The Nasdaq fell more than 4% over the week, while the S&P 500 also closed below its 50-day moving average, a sign the selling pressure has broadened beyond a few isolated names. The Cboe Volatility Index climbed above 22 for the first time in four months, underscoring how quickly risk appetite has deteriorated. Adalytica’s SPY trade signal snapshot showed “Extreme Fear,” while FX volatility signals also pointed to stress across markets.

Semiconductor stocks were the center of the move. The VanEck Semiconductor ETF dropped about 3% on Friday and roughly 10% for the week, as investors sold Micron, AMD and Sandisk amid worries about competition, pricing pressure and the debt burden some companies may take on to fund AI infrastructure. CoreWeave fell nearly 12% on the day and 25% on the week, reinforcing the market’s concern that the economics of the AI buildout may not be as clean as the narrative suggests.

The technical backdrop added to the damage. SOXX, the semiconductor ETF, closed well below its 50-day moving average and its relative strength index sank to 13.1, a deeply oversold reading by conventional technical measures. QQQ also lost ground, with its RSI at 29.2, while SMH’s RSI fell to 15.0. Those indicators do not cause the selloff, but they show how quickly momentum has turned against the sector.

The broader market did not escape the risk-off shift, even as energy shares rose with oil prices. Brent briefly touched $110 a barrel after escalating Middle East tensions raised concern about supply routes through the Strait of Hormuz, offering some support to the Dow. Still, the leadership breakdown in megacap technology was enough to dominate the session.

The backdrop for rates and currencies is not helping. The 10-year Treasury yield was still above 5%, keeping pressure on long-duration growth stocks by raising discount rates on future earnings. Meanwhile, the dollar weakened as traders pared expectations for another Federal Reserve hike, with Fed funds futures implying a higher chance the central bank holds steady later this month than a month ago.

For investors, the key question is whether this is a healthy reset after an extended run in AI-linked shares or the start of a deeper reassessment of earnings quality and capital intensity. Bulls can argue the structural AI spending cycle remains intact, with strong current demand still visible across the supply chain. Bears will counter that the market has become too reliant on a narrow group of names and too tolerant of expensive valuations in businesses still proving their return on AI investment.

Friday’s action suggests the burden of proof has shifted. Until investors see clearer evidence that AI capex can be converted into cash flow without excess leverage or margin compression, the semiconductor trade may remain vulnerable to further de-rating, especially if rates stay high and volatility remains elevated.