Nasdaq 100 futures sank 2.2% in pre-market trading Friday, signaling that the tech-led selloff that hit Wall Street on Thursday is still running hot as investors dump semiconductor names and reassess the cost of the artificial-intelligence boom. S&P 500 futures fell 1.1%, while Dow futures slid 0.7%, underscoring how the pressure is concentrated in the market’s most expensive growth trades rather than the entire index complex. The latest move follows a 1.28% drop in the Nasdaq 100 on Thursday and a 0.46% decline in the S&P 500.
The center of the rout remains semiconductors. The VanEck Semiconductor ETF fell roughly 2%, and the iShares Semiconductor ETF dropped more than 2%, as traders kept exiting a sector that had powered much of this year’s rally. That retreat comes after a global wave of selling in chipmakers gathered pace, with South Korea’s Kospi Index plunging 6.4% and heavyweight names SK Hynix and Samsung Electronics sliding 11.5% and 8.8%, respectively. Japan’s Nikkei 225 also fell 2.8%, showing how quickly the weakness has spread across Asia’s chip supply chain.
TSMC’s big earnings report did not calm nerves. Taiwan Semiconductor Manufacturing Co. posted better-than-expected second-quarter results, but the company also raised its 2026 capital expenditure forecast to $600–$640 billion. That was enough to trigger a drop of more than 4% in its US-listed shares, a sign that investors are no longer rewarding spending plans simply because they support AI demand. Instead, the market is asking a sharper question: how much capex is too much, even for the sector’s most important supplier?
The selloff is not a clean rejection of artificial intelligence. It is more of a repricing of how much of that future is already embedded in chip valuations. Barclays strategist Venu Krishna put it this way: “AI capital expenditure enthusiasm is starting to wane, but the semiconductor sector still significantly outperforms the broader market in stock performance, while software stocks continue to lag, indicating that the recent market rotation is incremental rather than decisive.” That framing matters. The market is not abandoning AI entirely; it is punishing the parts of the trade that had run the farthest ahead of earnings and cash flow.
TSMC’s higher spending outlook hit exactly that nerve. For months, investors treated massive capital outlays as evidence of durable demand. Now the same spending can read like a warning that margins, returns and discipline may not keep pace with the buildout. Dan Coatsworth, head of markets at AJ Bell, captured the tension: “While the case for boosting capacity is clear at a time when there is a large gap between supply and demand, shareholders will want TSMC to retain some discipline even as it looks to meet orders piling up.” That is the market’s current split screen: demand is strong, but the cost of serving it is getting harder to ignore.
The overnight tone worsened after Asia took its turn selling chip leaders. The steep drop in the Kospi, along with the weakness in SK Hynix and Samsung Electronics, told U.S. traders that the pressure was not just about one company or one earnings report. It was about a broader reassessment of the semiconductor cycle. When the world’s major chip hubs are falling together, U.S. futures tend to follow, and that is what happened here. Nasdaq 100 futures led the decline, with the broader S&P 500 and Dow futures also lower but to a lesser degree.
There was one important counterpoint in Thursday’s U.S. session: market breadth was healthier than the headline indexes suggested. On July 16, 369 S&P 500 stocks rose while 132 fell, even as the Nasdaq 100 and S&P 500 finished lower. That split hints at a market that is still rotating rather than collapsing, with gains in parts of the broader index offset by heavy selling in the most crowded tech positions. For now, the damage is focused, but the size of the move in futures suggests the pressure is still in control.
Some coverage linked the latest weakness to a Chinese AI startup, Moonshot, unveiling its Kimi K3 model and claiming competitiveness with OpenAI and Anthropic systems. That helped revive fears of another “DeepSeek moment,” in which a fresh model release pressures the assumptions behind big AI spending. But the cleaner read from the major market reports is that TSMC’s capex increase and the Asia chip slump did more of the heavy lifting in this selloff. The Moonshot angle may have added to the mood, but it was not the clearest primary driver in the evidence available.
That distinction matters because traders are trying to separate narrative from catalyst. A new model can rattle sentiment, especially when investors are already stretched on AI exposure. Yet the direct market reaction is still being driven by pricing, spending and supply expectations. The selloff is saying that even the strongest companies in the AI stack can lose credibility with investors when they talk up aggressive investment plans. In that sense, the market is reacting less to one product launch than to a growing fear that AI winners may be asking shareholders for too much patience.
The next test arrives quickly. Netflix is scheduled to report second-quarter 2026 earnings after the market close on July 16 and July 17, depending on the reporting window in the coverage, giving investors one more major read on whether large-cap growth can still support lofty expectations. On Friday, Fed speakers Lori Logan, president of the Dallas Fed, and Jeffrey Schmid, president of the Kansas City Fed, are also scheduled to speak, though the current market’s problem is less about policy and more about valuation. Rates matter, but the immediate pain is coming from the tech tape itself.
Geopolitics remains another live risk. Dow Jones Newswires reported that President Trump has been briefed on options to expand military operations amid the US-Iran conflict escalation. That is not the main driver of this selloff, but it adds another layer of uncertainty to a market already on edge. For now, the cleanest signal is the one coming from futures: investors are still unwinding the chip trade, and they are doing it fast. The question is whether this is just a sharp reset in an overheated corner of the market or the start of a deeper unwinding in the AI names that carried 2026’s rally.
