The S&P 500 and Nasdaq closed out their worst weekly performance since April 2024, with the tech-heavy index falling nearly 4.7% on the week as a sharp sell-off in AI semiconductor stocks, rising rate-hike expectations, and growing concerns about AI spending sustainability converged.

Key Highlights

• The S&P 500 fell approximately 2% on the week, closing below its 50-day moving average for the first time since April, while the Nasdaq lost close to 4.7% over the same period.

• The PHLX Semiconductor Index dropped roughly 7.9% for the week, its worst performance since early April, led by a collapse in AI chip stocks.

• ON Semiconductor fell nearly 24% after announcing an all-stock acquisition of Synaptics valued at approximately $7 billion, its largest deal ever.

• Market estimates now price in one 25-basis-point Fed rate hike and a roughly 27% chance of a second by year-end, with traders increasingly positioning for a hawkish policy stance under Chair Kevin Warsh.

Wall Street closed out its worst week in more than a year for technology and semiconductor stocks on Friday, with the Nasdaq Composite posting its fifth consecutive losing session. The index shed a further 0.24% on the day to close near 25,298, while the S&P 500 ticked down 0.05% to approximately 7,354. The Dow Jones Industrial Average outperformed marginally, shedding around 45 points on Friday but posting a slight gain over the full week.

The primary driver of the weekly decline was a sustained sell-off in AI chip stocks, which began early in the week following reports from South Korea that memory chipmaker SK Hynix might slow its high-bandwidth memory expansion. The PHLX Semiconductor Index fell nearly 7.9% over the five sessions, its steepest weekly drop since early April, with major AI semiconductor names dragging broader technology indices lower.

ON Semiconductor compounded the sector's pain on Friday, plunging close to 24% after announcing an all-stock deal to acquire Synaptics in a transaction valued at roughly $7 billion. The deal, ON's largest ever, raised dilution concerns among investors and pushed the stock toward its worst single-session loss in years. Synaptics shares moved higher on the announcement.

Interest rate concerns added further pressure throughout the week. Market participants have increasingly priced in a more hawkish trajectory under new Federal Reserve Chair Kevin Warsh, with one rate hike now appearing in consensus expectations and the probability of a second hike by December climbing toward 27%. A separate report showing US inflation rising above 4% in May, partly driven by Iran-war-related energy costs, reinforced the rate-sensitive mood across equities.