Dow gains as Apple offsets chip weakness, S&P 500 closes near flat

US stocks ended mixed on Friday as gains in the Dow Jones Industrial Average were offset by weakness in semiconductor stocks, while investors continued to monitor developments in the Middle East and their potential impact on global markets.

The Dow Jones Industrial Average rose 235 points, or 0.5%, supported by a 3% gain in Apple shares.

The S&P 500 edged up 0.05% to finish near flat, while the Nasdaq Composite fell 0.6% as chipmakers came under pressure.

Markets had traded higher earlier in the session after Reuters reported, citing three Pakistani sources, that Pakistan is considering a path toward new peace negotiations between the United States and Iran, with China initiating the effort.

However, the report also noted that significant obstacles remain before talks with Washington can begin.

Oil prices retreated from recent highs during the session, offering some support to equities, although investors remained cautious heading into the weekend amid continued military tensions in the Middle East.

Chip stocks retreat as AI spending concerns persist

Semiconductor stocks led the market's decline as investors continued to reassess the outlook for artificial intelligence spending following recent earnings reports from major technology companies.

Intel shares dropped 8%, reversing earlier gains despite reporting second-quarter results that exceeded Wall Street expectations and forecasting quarterly profit and revenue above analyst estimates.

The company also outlined plans to increase spending over the next two years.

The weakness spread across the semiconductor sector. Broadcom and Advanced Micro Devices each fell about 3%, while Micron Technology lost 7%.

The VanEck Semiconductor ETF (SMH) also declined 3%.

Investor caution has increased after Alphabet raised its capital expenditure guidance despite reporting negative free cash flow, prompting broader concerns about the scale of AI infrastructure spending ahead of earnings from Microsoft, Amazon, Meta Platforms and Apple.

The technology sector became the biggest drag on the S&P 500 as investors questioned how quickly higher AI investments would translate into stronger profitability. The Philadelphia Semiconductor Index also moved lower during the session.

Middle East tensions, tariffs and economic data remain in focus

Geopolitical developments continued to shape investor sentiment.

Earlier this week, President Donald Trump said he was considering a larger military response against Iran following attacks by Yemen's Houthi forces on Saudi oil tankers in the Red Sea.

On Friday, The New York Times reported that Trump met with senior advisers and cabinet officials to discuss whether to escalate US military action against Iran.

Although Brent crude fell nearly 4% to settle at $96.78 per barrel and West Texas Intermediate crude dropped 3% to $89.31, investors remained wary that further escalation could disrupt global energy supplies and reignite inflation concerns.

Markets also digested the Trump administration's new tariffs of 10% and 12.5% on imports from 60 trading partners after a temporary 10% global tariff expired.

Economic data released Friday showed US services sector activity accelerated in July, supported partly by spending related to the FIFA World Cup and Independence Day holiday, while manufacturing activity expanded at its slowest pace since March.

Among individual stocks, Digital Realty Trust gained after raising its full-year funds-from-operations forecast, helping the real estate sector outperform.

Oilfield services company SLB also advanced after reporting second-quarter profit above expectations.

For the week, the Dow and S&P 500 both finished lower, extending recent weakness, while the Nasdaq recorded a weekly decline of more than 2% as technology shares remained under pressure.