The S&P 500 ended lower on Friday, retreating from record highs, as losses in Dell, Nvidia, and other AI-related stocks weighed on the market. Investors were also digesting fresh inflation data, which suggested that recent tariffs are beginning to influence consumer prices.
Dell fell nearly 9%, one of the largest declines in the S&P 500, after the company reported high manufacturing costs for AI-optimized servers and intensified competition, overshadowing its optimistic forecast for AI infrastructure demand. Nvidia dropped 3.4%, marking its third consecutive day of losses following a quarterly report that fell short of lofty investor expectations, although it confirmed that AI-related spending remains robust.
“Today is just weakness in the top of the market, in tech,” said Zachary Hill, head of portfolio management at Horizon Investments in Charlotte, North Carolina. “This is not the first time we’ve seen worries about over-investment in AI and challenges with monetization.”
Meanwhile, the Commerce Department reported that U.S. consumer spending rose at the fastest pace in four months in July, while services inflation picked up slightly. Economists largely viewed the data as unlikely to prevent the Federal Reserve from cutting interest rates next month, given a softening labor market. A tariff exemption for packages under $800 also ended on Friday, increasing costs for businesses and, ultimately, consumers.
“Even if we see an uptick in inflation, which appears tariff-related and temporary, the Fed may look past it,” said Jim Smigiel, chief investment officer at SEI.
Expectations for an interest rate cut helped fuel gains earlier this year, with the S&P 500 and Dow Jones Industrial Average marking their fourth consecutive month of gains, while the Nasdaq notched a fifth straight monthly rise. However, on Friday, the S&P 500 fell 0.64% to 6,460.26, the Nasdaq declined 1.15% to 21,455.55, and the Dow slipped 0.20% to 45,544.88.
Among sector movements, six of the 11 S&P 500 indexes advanced, led by healthcare (+0.73%) and consumer staples (+0.64%). In contrast, the S&P 500 technology index dropped 1.63%.
Notable movers included Alibaba, whose U.S. shares jumped 13% after strong quarterly growth in its cloud computing division, fueled by AI demand, and news of a new AI chip development. Conversely, Marvell fell nearly 19% after projecting lower-than-expected quarterly revenue, and Caterpillar declined 3.65% due to higher anticipated tariff-related expenses.
The Russell 2000, which tracks smaller companies, slipped 0.5% on Friday but posted a 7% gain in August. Advancing issues outnumbered declining ones on the S&P 500 by a 1.3-to-1 ratio, with the index recording 21 new highs and no new lows. The Nasdaq saw 76 new highs and 67 new lows.
Trading volume was slightly lighter than usual, with 14.8 billion shares exchanging hands compared to the 20-day average of 16.4 billion shares. U.S. markets will remain closed on Monday for Labor Day.