U.S. stock markets drifted Friday as investors weighed concerns about artificial intelligence disruptions against hopes for more Federal Reserve interest rate cuts following a cooler-than-expected inflation reading. The mixed sentiment left major indices struggling to find direction in thin trading ahead of the weekend.

AI-related stocks faced pressure after recent volatility in the sector, with some investors questioning the sustainability of the AI rally that has driven much of the market's gains this year. Meanwhile, the softer inflation data provided some relief to rate-sensitive sectors, though traders remained cautious about the pace and magnitude of potential Fed easing.

The conflicting forces created a tug-of-war in the markets, with technology shares pulling in one direction while defensive sectors gained support from the prospect of lower borrowing costs. Treasury yields edged lower as the inflation report suggested the central bank may have more flexibility to cut rates