US stocks opened higher on Friday before turning lower. A surge of more than 14% in Amazon shares initially lifted the market, with its strong results also buoying a number of companies riding the artificial intelligence wave. As of 10:14 am New York time, the S&P 500 had slipped 0.4%, while the tech-heavy Nasdaq 100 fell 0.4%. The Philadelphia Semiconductor Index edged slightly lower.

A sharp decline in Apple shares, which plunged 8.6% for its biggest intraday drop since April 2025, weighed on the major indices. Component shortages are dragging on the tech giant's sales outlook, suggesting the supply-side impact across the industry may be more severe than initially anticipated.

With the earnings season now past its halfway point, industry data shows that 86% of the 291 S&P 500 companies that have reported results have beaten expectations. This ratio is on track to be the highest in five years. While demand for AI-related products remains strong, shares in these companies have been highly volatile following a significant run-up in stock prices. Market expectations are sky-high, leaving little room for disappointment.

Chip stocks have also been swinging wildly on worries about intensifying competition, potential overcapacity, and whether the tens of billions of dollars in AI investment will pay off. Max Kettner of HSBC noted, "Is the unwind of momentum trades over? A reversal in 'momentum' could propel stocks to new record highs." A deal involving billionaire Ken Griffin and the struggling hedge fund Situational Awareness helped fuel a relief rally in global AI stocks.

Traders are currently debating whether the worst is over or if more turbulence lies ahead. Kettner added, "News of the unwind of the Situational Awareness AI hedge fund provides a welcome narrative for the market to explain the renewed selling in chip stocks over the past two weeks. In our view, technical conditions have also clearly improved. This creates a strong backdrop for a positive reversal in 'momentum' trades."