NEW YORK: Wall Street extended its decline on Friday (Jul 17) as a pullback on stocks associated with the AI boom, which has driven many of the gains so far this year, morphed into a larger risk-off sentiment.

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

All three major US stock indexes closed lower on the day and posted weekly losses.

The Philadelphia SE Semiconductor Index .SOX logged its steepest weekly loss in over a year, and has tumbled over 18 per cent so far in July. Even so, the index remains up nearly 65 per cent year-to-date, compared with the S&P 500's nearly 9 per cent gain over the same time frame.

The SOX closed 20.2 per cent below its Jun 22 record closing high, confirming the index entered a bear market on that date.

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.

"It's like the market has chip fatigue," said Ryan Detrick, chief market strategist at Carson Group in Omaha, Nebraska. "Chip stocks are down three of the last four weeks, and it's the same worries, the same concerns; those stocks got way ahead of themselves, and now they're coming back to Earth."

Among the Magnificent Seven group of AI-related megacaps, all but Apple AAPL.O dipped, with Meta META.O and Alphabet suffering the worst of it, down 2.7 per cent and 3.2 per cent, respectively.

The Dow Jones Industrial Average .DJI fell 406.55 points, or 0.77 per cent, to 52,146.42, the S&P 500 .SPX lost 76.08 points, or 1.01 per cent, to 7,457.69 and the Nasdaq Composite .IXIC lost 361.70 points, or 1.40 per cent, to 25,520.24.

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

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