Wall Street extended its decline on Friday as a pullback on stocks associated with the AI boom, which has driven much of the gains so far this year, morphed into a larger risk-off sentiment.

Semiconductor stocks, which have led the broader market’s move in recent sessions, initially led the selloff, which broadened as the session progressed.

All three indexes were on course to post weekly losses.

The Philadelphia SE Semiconductor Index was last down 1.0%, and remained on track for its steepest weekly loss since early April, and has tumbled about 17% so far in July. Even so, the index remains up 63.2% year-to-date, compared with the S&P 500’s 10% gain over the same time frame.

Some investors in the artificial intelligence space have begun positioning for a slowdown in the nearly trillion-dollar spending boom, with some active managers already scaling back their exposure, according to a Reuters analysis.

“The story is over for chips because the story is not over for AI,” said Sam Stovall, chief investment strategist at CFRA Research in New York. “(Chips) have come so far, so over an extended period, it’s like an army that got too far ahead of its supply lines and has to retreat and let the fundamentals catch up.”

Every member of the Magnificent Seven group of AI-related megacaps dipped, with Meta and Alphabet suffering the worst of it, down 2.7% and 3.2%, respectively.

The Dow Jones Industrial Average fell 290.49 points, or 0.56%, to 52,260.46, the S&P 500 lost 64.87 points, or 0.86%, to 7,468.83 and the Nasdaq Composite lost 308.67 points, or 1.19%, to 25,573.27.

Among the major sectors of the S&P 500, communication services and technology were down the most, while energy stocks were the sole gainers, benefitting from spiking crude prices amid signs of escalating hostilities in the Iran war.

War equipment makers were also clear outperformers.

Q2 Earnings Season Gets off to an Upbeat Start

Second-quarter earnings season is still in its early days, with 49 of the companies in the S&P 500 having reported. Of those, 90% have delivered better-than-expected results, according to LSEG.

Analysts now see year-on-year S&P 500 earnings growth of 26.0%, on aggregate, up from the 19.2% expectations as of April 1, per LSEG.

Netflix tumbled 6.7% after the company’s weaker-than-expected earnings forecast, raising doubts about the sustainability of the content growth momentum.

Uber Technologies dropped 1.8% after the rideshare app announced it would acquire Germany’s Delivery Hero in a deal worth nearly $15 billion.

Intuitive Surgical shares slid 13.1% after the medical device maker kept its da Vinci procedure-growth forecast unchanged and warned insurance-plan changes may be delaying patient care.

On the economic front, consumer sentiment increased to a five-month high in July, but single-family housing starts and building permits dipped, and industrial output increased by a meager 0.1%.

Declining issues outnumbered advancers by a 2-to-1 ratio on the New York Stock Exchange. There were 241 new highs and 166 new lows on the NYSE.

On the Nasdaq, 1,792 stocks rose and 2,855 fell as declining issues outnumbered advancers by a 1.59-to-1 ratio.

The S&P 500 posted 46 new 52-week highs and 4 new lows while the Nasdaq Composite recorded 65 new highs and 169 new lows.

(Reporting by Stephen Culp in New York; Additional reporting by Ragini Mathur and Avinash P in Bengaluru; Editing by Matthew Lewis)