Wall Street closed last week with a mixed picture: the Nasdaq Composite plunged 4.6%, its sharpest weekly drop in months, amid a broad sell-off in AI-related stocks. In contrast, the Dow Jones Industrial Average managed to gain 0.6%, in what analysts call a textbook rotation out of expensive growth stocks into defensive sectors.
On Friday, the three major indexes closed slightly lower, extending a five-session losing streak, the longest for the S&P 500 since August 2025. The S&P 500 slipped 0.05% to 7,354, the Dow lost 0.09% to 51,876, and the Nasdaq fell 0.24% to 25,298.
What Happened to AI Stocks?
Semiconductor and technology stocks were the main drag on the market last week. NVIDIA, the AI sector leader, shed roughly 7.7% for the week and closed at $192.53, well below the $220+ highs recorded earlier in June. The stock briefly dipped below the psychologically important $200 level during intraday trading.
Investor concerns are centered on the massive costs of AI infrastructure. Market participants are increasingly questioning whether the enormous capital expenditures by Big Tech will generate adequate returns. Apple lost more than 5% for the week, partly on news of price hikes tied to rising memory and storage costs.
Micron, however, bucked the trend with gains driven by strong AI-related guidance, suggesting the picture within the semiconductor sector is more nuanced than a uniform sell-off.
The Great Rotation: Who Bought and Who Sold?
Last week offered a textbook example of sector rotation out of expensive growth into defensive value plays, as reflected in the weekly sector returns:
- Healthcare: +7.21%
- Real Estate: +3.74%
- Utilities: +3.53%
- Consumer Staples: +1.58%
On the losing side, Technology, Communication Services, and Consumer Discretionary led the declines. Eight of the 11 S&P 500 sectors actually finished the week in positive territory, a misleading headline figure given tech's outsized weight in the index.
"The AI trade is getting complicated," several market commentators wrote over the weekend. Hot money rotated out of AI names into bonds, healthcare, and value stocks.
What to Watch This Week
The coming week (June 29–July 3) is expected to be relatively quiet in terms of economic data. No major macro releases or earnings are due on Monday, leaving the focus on AI-related stock behavior and whether the sell-off finds a floor.
Futures as of Friday's close point to a negative open: Dow futures were down 0.34%, S&P 500 futures down 0.49%, and Nasdaq 100 futures down 1.60%. These levels reflect late Friday sentiment and may shift by Sunday evening's trading.
The Bottom Line
The U.S. market is in a period of AI-driven correction and broad sector rotation. While AI stocks are under pressure, entire sectors are rising. The big question ahead of Monday's open is whether AI spending concerns will continue to weigh on the sector or whether this pullback represents a buying opportunity for more patient investors.
