Chip buyers returned to the Nasdaq 100 on Monday, but the AI trade faces its biggest test this week with earnings from Intel, Texas Instruments and Alphabet.
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Nasdaq 100 climbs 1.3% as chip buyers return before Big Tech earnings
Chip buyers returned to the Nasdaq 100 on Monday, but the AI trade faces its biggest test this week with earnings from Intel, Texas Instruments and Alphabet.
The Nasdaq 100 climbed 1.3% as semiconductor stocks rebounded, paring last week's losses ahead of a crucial week of Big Tech earnings. The S&P 500 advanced 0.6%, while the Dow Jones Industrial Average slipped about 100 points to near 52,000, sitting out the tech-led rally.
"The bounce is happening inside a damaged trend, and the chip complex is midway through a reality check," analysts at Wells Fargo said, warning that recent technical deterioration raises the odds of a deeper pullback toward long-term moving averages.
The Philadelphia Stock Exchange Semiconductor Index surged 3.1% after falling into a bear market on Friday. Micron Technology gained 3%, Advanced Micro Devices added 2%, Teradyne rose 5% and Astera Labs climbed 4%. Microsoft's decision to deploy AMD's new Helios racks across its Azure data centers — joining Meta, OpenAI and Oracle as early customers — provided the day's catalyst. The rebound was not uniform globally: South Korea's Kospi shed 4.5% on heavy losses in Samsung and SK Hynix.
The stakes for the week ahead are high. Intel reports on Thursday, Texas Instruments on Tuesday and Alphabet on July 28 — three earnings that will test whether AI infrastructure spending can justify the sector's elevated valuations. Disappointments could trigger a sharp selloff in tech, while strong results would reinforce the AI trade that has driven much of this year's gains.
A Rally Built on Diplomacy Hopes
The rebound in risk assets also drew support from diplomatic signals out of the Middle East. A spokesman for Iran's Foreign Ministry told reporters that intermediaries are still exchanging messages between Washington and Tehran, and that negotiations could proceed where national interests allow. That single formulation helped underwrite the day's risk appetite, even as the United States logged a ninth consecutive day of strikes on Iran and Houthi militants declared a maritime embargo against Saudi Arabia.
West Texas Intermediate crude traded little changed near $82 a barrel, while Brent held around $88. The US dollar index edged higher, recovering from intraday lows as the greenback absorbed the crosscurrents of geopolitical risk and shifting rate expectations.
Rates Market Prices a Different Outcome
The same geopolitical backdrop that equity investors are shrugging off is doing the heavy lifting in rates. Fed funds futures assign an 83% probability to a hold at the July 29 Federal Open Market Committee decision, but a first rate hike is priced at 76% by the September meeting, with December carrying a 41% chance of a second move into a 4%-4.25% target range. The 10-year Treasury yield edged higher as the inflation passthrough from higher energy and freight costs keeps the Fed on a hawkish footing.
The divergence between equity and rates markets is stark. Investors buying stocks are effectively betting on a diplomatic resolution, while the rates market is pricing the inflation passthrough from a prolonged conflict. Both trades cannot be right at once, and the July 29 FOMC decision — with no refreshed economic projections due until September — will force a reckoning.
This article is for informational purposes only and does not constitute investment advice.
