Markets Tumble as Chip Sell-Off Deepens and Netflix Plunges 11%

Wall Street is bracing for a rough day as a widening chipmaker sell-off rattles markets and drags major stock indexes lower. Growing anxiety over artificial intelligence spending, a steep drop in Netflix shares, and escalating tensions in the Middle East have combined to sour investor sentiment heading into Friday’s session.

The result is a broad retreat across technology stocks, with semiconductors bearing the brunt of the damage and few corners of the market left untouched.

Futures Slide Across the Board

The pressure was evident before markets even opened. Nasdaq-100 futures fell sharply, dropping 1.9% as technology stocks came under intense scrutiny.

The weakness spread across the major benchmarks:

• Nasdaq-100 futures declined 1.9%
• Dow Jones Industrial Average futures slipped 333 points, or 0.6%
• S&P 500 futures lost 0.9%

The declines pointed to a jittery mood among investors, with the tech-heavy Nasdaq absorbing the heaviest blow as questions about the AI boom took center stage.

Semiconductors Lead the Retreat

At the epicenter of the sell-off sat the chip sector, which extended its losses into Friday’s premarket trading. U.S.-listed shares of chipmakers and related companies fell broadly, deepening a slide that had already gripped the previous session.

The damage across semiconductor stocks was widespread:

• The iShares Semiconductor ETF and the VanEck Semiconductor ETF were both down more than 3%
• Applied Materials, LAM Research, Intel, KLA Corporation, and Arm each fell 4%
• Micron and Nvidia both lost more than 2%

Adding to the gloom, Chinese startup Moonshot AI unveiled a new model that it claims narrows the gap with the top offerings in the United States. That announcement intensified fears about competition in the AI space, further weighing on chipmakers that have ridden the AI wave to lofty valuations.

A Week of Broad Losses

The Friday slump caps a difficult stretch for the market. The VanEck Semiconductor ETF is down 6.9% for the week, putting it on pace for its third weekly decline in four weeks — a sign that the enthusiasm around chips is cooling.

The major indexes have also struggled week to date. The S&P 500 is off by 0.6%, while the Dow and Nasdaq have slipped 0.2% and 1.5%, respectively. The selling wasn’t confined to the United States, either. A sell-off in Asia-Pacific markets accelerated on Friday, with chipmakers extending their declines, and the downturn reached Europe as well, underscoring the global nature of the anxiety.

Wall Street Divided on What Comes Next

Analysts offered contrasting interpretations of the turmoil, revealing a genuine debate about whether the AI-driven rally has gotten ahead of itself.

Strategists at BBH struck a cautious tone, noting that investors are increasingly questioning the sustainability of the ongoing AI capital expenditure boom. They pointed to a warning from the Bank for International Settlements, whose annual economic report cautioned that boom-bust cycles are a regular feature of past investment surges driven by transformative technologies.

Barclays strategists, by contrast, appeared far more relaxed about the volatility. While acknowledging that tech turbulence may persist in the near term, they argued that the reset in positioning should ultimately prove healthy. In their view, the pullback could create more attractive entry points for long-term investors focused on the structural AI theme.

That split captures the central tension in markets right now — whether the current weakness is a warning sign or simply a buying opportunity in disguise.

Netflix Stumbles on Earnings

Beyond the chip sector, Netflix emerged as one of the day’s biggest losers. Shares tumbled more than 11% after the company reported second-quarter results.

The problem wasn’t a disastrous quarter so much as a failure to impress. Netflix’s results came in roughly in line with expectations, but a disappointing earnings forecast spooked investors and triggered the sharp decline. For a stock that has commanded high expectations, merely meeting them — while offering a soft outlook — proved enough to send shares sliding.

Intuitive Surgical Braces for Its Worst Day in Years

Another notable casualty was Intuitive Surgical, whose shares fell more than 9% in premarket trading following its earnings report released after Thursday’s close. If those losses hold through the session, the stock is poised for its worst day since early 2022.

The maker of surgical robotic tools actually beat expectations on both earnings and revenue. Yet worries about an external factor overshadowed the strong numbers: the expiration of enhanced Affordable Care Act premium subsidies.

On the earnings call, CFO Jamie Smith explained that customer feedback suggested a modest adverse impact to second-quarter US da Vinci procedure growth — a type of robotic surgery — from patients affected by the loss of those ACA enhanced premium subsidies. The concern compounded an already difficult year for the company, with shares down nearly 29% in 2026.

The Iran War Keeps Oil in Focus

Layered on top of the tech worries was the ongoing US-Iran war, which continued to command attention on Friday and pushed oil prices higher.

Energy markets reflected the tension, with US West Texas Intermediate crude futures last trading above $81 per barrel and international benchmark Brent crude futures climbing above $86. The military developments driving that move were significant:

• Kuwait said Iran had attacked a power and water desalination plant
• US Central Command reported completing its sixth consecutive evening of strikes against Iran, hitting dozens of military targets including logistics infrastructure and maritime capabilities
• Iranian officials claimed to have targeted US military forces in Syria and Bahrain, widening Tehran’s attacks across the Middle East

The escalation came as a fragile truce reached last month has fractured, once again disrupting energy flows through the strategically vital Strait of Hormuz — a waterway that typically handles around 20% of the world’s oil traffic. The renewed threat to that chokepoint helps explain why oil prices remain elevated even as stocks fall.

The Bigger Picture

Friday’s market action reflects a convergence of pressures that together have unsettled investors:

• Deepening doubts about the sustainability of massive AI spending
• Rising competition from Chinese AI firms challenging US dominance
• Disappointing corporate guidance from high-profile names like Netflix
• Geopolitical instability keeping oil prices elevated and adding uncertainty

Looking Ahead

The combination of a chip sell-off, weak earnings reactions, and an intensifying conflict abroad has left markets on edge as the trading day begins. Whether this proves to be a healthy reset, as some strategists suggest, or the start of a deeper reckoning with AI valuations remains an open question.

For now, investors face a market wrestling with competing narratives — one of long-term opportunity in transformative technology, and another of caution rooted in history’s warnings about investment booms. As the session unfolds, the direction of chip stocks, the fallout from Netflix’s forecast, and the trajectory of the Iran conflict will all help determine whether the selling continues or steadies. What’s certain is that the easy gains of recent months have given way to a far more uncertain and volatile stretch.