S&P 500 and Nasdaq futures declined on Friday as semiconductor stocks lost momentum following a strong multi-week rally, while investors turned cautious ahead of the U.S. nonfarm payrolls report that could shape the Federal Reserve’s policy outlook.

Chipmakers led the decline in premarket trading. Nvidia (NVDA), the world’s largest company by market capitalization, fell 1.2%, while Intel (INTC), Micron (MU), AMD (AMD), and Broadcom (AVGO) dropped between 1.2% and 2.5%. The weakness reflects profit-taking after a powerful AI-driven rally that helped push U.S. equities to record highs.

Market strategists noted that sentiment around AI and semiconductors is becoming more fragile after months of strong gains. Barclays’ Emmanuel Cau pointed to crowded positioning in the sector, upcoming IPO-related liquidity events, and policy uncertainty as potential headwinds.

Attention now shifts to the Labor Department’s employment report, expected to show that the U.S. economy added about 85,000 jobs in May, slightly below April’s 115,000. The data is expected to reinforce the view of a cooling but still stable labor market.

Economists say the report will be key for the Federal Reserve as it balances inflation pressures—partly driven by higher energy costs linked to geopolitical tensions—with signs of slowing labor demand. Markets currently expect interest rates to remain unchanged well into next year.

Geopolitical risks also remain in focus, with ongoing tensions in the Middle East and stalled ceasefire efforts between Israel and Hezbollah adding to uncertainty around oil prices and inflation.

Despite near-term weakness, the broader U.S. equity market remains near record highs. However, Friday’s losses put the S&P 500 on track for its first weekly decline since April, while the Nasdaq is also set for a modest weekly drop after a strong rally earlier in the quarter.