Last Friday, chip stocks plunged collectively, pushing the semiconductor index officially into bear market territory, with all three major indices posting two consecutive declines and erasing all gains since July. Apple stood as the sole exception among the Big Seven, rising for three consecutive days to hit new highs, briefly surpassing NVIDIA in market capitalization and reclaiming the top spot in the U.S. equity market. Over the weekend, U.S. military strikes against Iran escalated into the eighth night, with commercial navigation through the Strait of Hormuz reportedly reduced to zero, driving crude oil prices up nearly 16% for the week. This week’s focus shifts to earnings from tech giants like Alphabet, where guidance on AI capital expenditures will directly determine whether this round of sell-offs can find a bottom.

Market Performance

S&P 500 closed down 1.01%, at 7457.69 points, accumulating a weekly decline of 1.55%. Dow Jones Industrial Average fell 0.77%, closing at 52146.42 points, with a weekly drop of 0.93%. Nasdaq Composite dropped 1.40%, settling at 25520.244 points, marking a weekly loss of 2.90%.

The semiconductor index declined 1.6% on the day, falling nearly 10% for the week and officially entering technical bear market, with cumulative drawdown exceeding 20% from its June-end peak. NVIDIA closed down over 2%, briefly losing market cap lead to Apple during intraday trading. Apple was the only one of the Big Seven to rise, posting three consecutive record highs and gaining nearly 6% for the week.

SpaceX dropped 5.43%, with a market valuation of $1.63 trillion—over $1 trillion has evaporated since its mid-June peak of $2.64 trillion. Starship V3 testing was abruptly halted due to engine ignition failure. Netflix slid more than 7%, as investors worry about continued deceleration in sales growth for two consecutive quarters.

WTI crude settled up 4.48%, at $82.49 per barrel, with a weekly gain of 15.52%. Brent crude rose 4.59%, closing at $88.10 per barrel, adding 15.91% for the week. Spot gold advanced 0.68%, ending at $4012.70 per ounce, but still posted a weekly loss of 2.23%. Spot silver gained 0.25%, closing at $56.038 per ounce, with a weekly decline of 6.31%. Bitcoin dipped below $63,000 during the session, dropping nearly 3% from its intraday high.

The 10-year U.S. Treasury yield stood at 4.55%, declining by approximately 1 basis point for the week. The 2-year U.S. Treasury yield was at 4.18%, down around 3 basis points over the week. The U.S. Dollar Index turned upward in the short term.

Macro & Outlook

Geopolitical tensions showed no sign of easing over the weekend, instead escalating further. U.S. military operations against Iran have now spanned eight consecutive nights. U.S. military bases stationed in Jordan suffered four attacks within five days, resulting in the deaths of two American service members. Iran has adopted a harder stance: its Supreme Leader formally annulled previously signed memoranda of understanding, while the military issued threats of a “devastating” response to U.S. actions. More concerning is the Strait of Hormuz, where Iranian sources claim commercial traffic has completely ceased. At the opening of Asia-Pacific trading on Monday, international crude futures jumped 2% on gap-up open, indicating that markets continue pricing in heightened conflict risk.

The most significant market event this week is Alphabet’s after-hours earnings report on Wednesday. Beyond its own advertising and cloud businesses, the scale of Google’s investment in AI infrastructure ranks among the largest in the industry. Thus, what the market truly cares about is management’s guidance on future spending—how much they plan to invest, rather than quarterly profits. A fund manager warned that even a subtle hint of budget contraction in Google’s commentary could trigger a broad sell-off across the entire AI supply chain. However, given the current competitive landscape—OpenAI, Anthropic, and Meta are all continuing aggressive spending—Google’s attempt to proactively slow down at this juncture appears highly unlikely. In addition to Google, Intel, Texas Instruments, and Tesla will also release their results throughout the week. Over 80 companies in the S&P 500 are scheduled to report second-quarter earnings, with analysts projecting overall year-over-year profit growth near 26%.

Just weeks ago, Samsung Electronics and TSMC delivered impressively strong earnings figures, yet their stock prices barely reacted. This signals that investor expectations for the semiconductor sector have been priced in to an extreme degree—mere positive numbers are no longer sufficient. Investors now demand concrete evidence that current high levels of market enthusiasm can be sustained. This logic likely applies equally to this week’s Alphabet and Intel reports.

On the Federal Reserve front, markets largely expect no policy action at the July 31 meeting. Traders have shifted bets on the next rate hike to December, effectively ruling out a September increase. However, Fed officials remain divided. Cleveland Fed President Mester expressed a notably hawkish tone last week, stating that inflation remains too high and the labor market is nearing full employment. Meanwhile, bond markets acted faster—the yield curve began steepening, suggesting that the bond market has already begun tightening preemptively, effectively pressuring the Fed to move less urgently.

Trend Perspective

The recent selloff in chip stocks stems from a straightforward dynamic: excessive position concentration and leveraged exposure. Once any minor negative signal emerges, it can quickly spiral into a panic sell-off, regardless of underlying fundamentals. Most institutions believe the deleveraging process is nearing completion, but a catalyst capable of restoring market confidence remains missing in the short term.

Alphabet’s upcoming earnings report may well serve as that catalyst—or, more precisely, the final straw that breaks the camel’s back. Market tolerance for AI hardware stocks is now extremely low. Samsung and TSMC’s “better-than-expected but flat stock price” performance has already set a precedent. Should Google’s capital expenditure guidance show even the slightest ambiguity, the market is likely to interpret it as a sign of industry-wide contraction, triggering a broader sell-off extending from semiconductors to wider cloud and AI software segments.

Apple’s recent outperformance deserves close attention. As capital flows out of hardware narratives such as storage and chips, investors are increasingly rotating back toward cash-flow-stable, relatively conservative valuations like Apple. How long this defensive rotation can persist depends entirely on whether this earnings season delivers a clear directional signal. With both Middle East developments and Federal Reserve policy paths unlikely to see decisive changes in the near term, the true determinant of this week’s market sentiment remains the corporate earnings themselves.

Source: TechFlow Column