Oil prices broke above $100, and AI cooled off—Nasdaq 100 erased more than 5% in two weeks

Nasdaq 100 drops for the second straight week; the AI narrative is being genuinely priced into question for the first time

Conclusion first: the Nasdaq 100 fell 2.13% this week, and combined with last week’s decline, it marked the first time since March that it has posted back-to-back weekly losses. This is not a routine technical pullback. Instead, the market is repricing the question of whether “AI capital expenditures can deliver returns,” while Middle East geopolitical tensions are pushing oil prices higher, creating a double squeeze.

Background

In June, Nasdaq 100 once climbed to a historical high of 30,773 points. After that, it entered an “elevator-style” decline, and by July 20 it had pulled back more than 4% from the peak. In the week of July 17, Nasdaq fell 2.9%, setting the largest one-week drop in recent history. This week (as of July 24), the S&P and Nasdaq both slid for a second consecutive week, and the Dow has even been down for a third straight week. Market sentiment has shifted from “chasing AI upside” to “reassessing valuations and the quality of cash flows.”

Data and logic

On July 23, Nasdaq 100 fell 1.87% in a single day, marking the largest one-week decline since June. On July 24, the Nasdaq Composite Index dropped 0.64% to 24,975.82 points. The Philadelphia Semiconductor Index fell 4.25% on the day, and at one point during the week it was down more than 3%.

One trigger: Alphabet raised 2026 capital expenditures to as much as $205 billion. The market has renewed doubts about the sustainability of AI spending at such massive scale; the stock fell more than 7% that day. Tesla’s second-quarter results also missed expectations. Operating expense growth outpaced revenue growth, and the stock dropped more than 14% in a single day.

Second trigger: Houthi attacks on oil tankers in the Red Sea, along with rising tensions between Iran and the U.S., pushed Brent crude to break above $100 per barrel at one point—its highest level in seven weeks—raising concerns about a rebound in inflation and expectations of higher-for-longer rate hikes, which suppressed risk appetite.

On the valuation front, after the second-quarter earnings season, the Nasdaq 100’s forward P/E ratio slipped to around the 30x range, below the valuation level at the March lows. This suggests the current correction is driven more by profit expectations and sentiment than by a simple break in a valuation bubble.

Impact

Semiconductors and the memory segment are the core drag in this round of declines. Weakness in the SOX index flowed through directly to the Nasdaq’s overall performance. Funds appear to be rebalancing from high-valuation growth stocks toward defensive sectors (such as consumer staples) and the financials. This divergence signals that the market is not trading a “full-blown economic recession,” but rather recalibrating the investment return cycle for AI capital expenditures.

Outlook

The key near-term level sits around 28,200 points (Nasdaq 100). If the weekly close falls below, there is risk that technicals could extend the drop further toward roughly 27,800. If it can reclaim the 28,900–29,000 resistance zone, the adjustment may either stop or end as a healthy pullback. Over the medium to long term, Q4 is the critical window to test whether AI capital expenditures can translate into actual profits; during the Q3 earnings season, data on cloud providers’ capital returns will be a key observation metric.

Risk warning: escalation in the Middle East situation, further increases in oil prices, and the Federal Reserve delaying its rate-cut path could all extend the duration of this correction. At the same time, investors should remain alert to the risk of cascading liquidations from highly leveraged funds in an environment of tightening liquidity. DYOR

#Nasdaq 100 logs its first back-to-back weekly declines since March