US equity markets pulled off the kind of late-day reversal that makes portfolio managers reach for the antacids. The Dow, S&P 500, and Nasdaq all gave up their morning gains in the final hour of trading, capping what has become an increasingly uncomfortable stretch for investors betting on the tech-led rally to continue indefinitely.

The S&P 500 fell 0.1%, marking its third consecutive losing session. The Nasdaq Composite dropped 0.4%, weighed down heavily by weakness across the semiconductor sector. The Dow, which had managed a 0.4% gain earlier in the week, joined the downward slide in the session’s closing minutes.

Chip stocks lead the retreat

The culprit behind the broader market weakness has a familiar name: semiconductors. Memory-chip manufacturers including Samsung, SK Hynix, and Micron have been under significant pressure, dragging the technology sector lower and taking the major indices along for the ride.

The Nasdaq Composite traded as low as approximately 25,358 during the volatile stretch, well off its recent highs near 26,166. The S&P 500 hovered in a range between roughly 7,357 and 7,472, unable to find stable footing as sellers overwhelmed buyers into the close.

Investors rotated into defensive sectors during the session.

AI spending concerns cast a longer shadow

Beyond the chip-specific weakness, a broader narrative is taking shape around AI investment costs. The enormous capital expenditures required to build and maintain AI infrastructure are starting to raise questions about whether the returns justify the spending.

The S&P 500 was facing a potential weekly loss exceeding 1%. The Nasdaq was on track for approximately a 4% weekly decline, a significantly sharper pullback that reflects how concentrated the pain has been in technology names.

Crypto feels the ripple effects

The tech selloff hasn’t stayed contained to equities. Bitcoin dropped below the $60,000 level, trading around $59,470 as the equity weakness spilled over.

Crypto-adjacent equities showed correlated weakness as well. Stocks like MicroStrategy (MSTR) and Coinbase (COIN), which effectively function as leveraged Bitcoin proxies for many investors, have exhibited similar patterns of decline during previous sessions of tech-driven selling.

What to watch going forward: earnings reports from major semiconductor companies will be the most immediate catalyst. If chip makers can demonstrate that AI demand remains robust despite cost concerns, the current selloff could prove to be a healthy correction rather than the start of something uglier.