NEW YORK — The euphoria surrounding artificial intelligence investments evaporated Friday as the darlings of the AI revolution endured a convulsive sell-off that sent global markets reeling and briefly stripped Nvidia of its title as Wall Street's most valuable company.

The bearish sentiment swept through technology sectors worldwide, with the S&P 500 descending 1% to 7,457.69, marking only its third losing week since late March. The Dow Jones Industrial Average plummeted 406.55 points to 52,146.42, while the tech-heavy Nasdaq Composite plunged 361.70 points, or 1.4%, to 25,520.24.

The sell-off reflected mounting investor apprehension that AI-related stock prices have reached unsustainable heights, with concerns that the voracious demand for computer memory and processors may ultimately prove untenable if artificial intelligence fails to deliver the lucrative profits and productivity gains that have been pledged.

Global Markets Contagion

The contagion spread far beyond American shores. Asian markets experienced even more severe declines during their trading sessions:

Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, dropped 7.3%, while South Korea's market experienced such extreme volatility that the Kospi index recorded a 6.2% surge one day followed by plunges of 6.4% and 8.9% on others. The market was closed Friday for a holiday, providing only ephemeral respite.

Chinese AI Threat Emerges

Adding fuel to the pandemonium, news emerged of a powerful new Chinese AI model called Kimi K3, developed by startup Moonshot. The announcement sent shockwaves through markets, reminiscent of the turmoil caused by China's DeepSeek announcement in early 2025.

Investors fear that cost-effective rivals to Western AI models like ChatGPT and OpenAI could substantially undermine demand for computer chips and other critical components, potentially devastating the business cases underpinning current AI infrastructure valuations.

Oil Prices Surge on Iran Conflict

Compounding the technology sector's tribulations, crude oil prices continued their meteoric ascent amid escalating military tensions with Iran.

The United States expanded its airstrike campaign against Iran early Friday, hitting additional bridges and collapsing a tower at a pivotal Iranian port. The military action intensified fears about whether oil tankers can continue to traverse the Strait of Hormuz, the critical chokepoint for carrying crude from the Persian Gulf to global customers.

Elevated oil prices have propelled Treasury yields upward in the bond market, threatening to impede economic growth and depress prices for stocks and other investments. Higher yields have already pushed the average 30-year mortgage rate to its highest level in nearly a year.

Earnings Disappointments Add Pressure

Beyond the AI and energy turmoil, several companies faced precipitous drops following their latest earnings reports, as investors demand substantial growth to justify the considerable stock price increases already realized.

Market Rotation Accelerates

The selloff marks a significant shift from the robust AI-driven rally seen in recent months, with capital rotating toward defensive and energy-related assets as investors reassess risk in an increasingly volatile environment.

European stock indexes, which carry less exposure to AI and technology stocks, experienced more muted moves, underscoring the targeted nature of the technology downturn.

What Comes Next?

As markets close Friday's tumultuous session, investors face considerable uncertainty. The confluence of AI valuation concerns, geopolitical tensions, rising energy costs, and ascending bond yields creates a formidable headwind for equities.

The critical question now is whether this represents a transitory correction in an otherwise robust bull market, or the genesis of a more prolonged downturn for the technology sector that has spearheaded market gains for the past decade.