Oil prices break $100, and AI cools off—Nasdaq 100 wipes out more than 5% in two weeks

Nasdaq falls for two straight weeks, and the AI narrative is being seriously questioned for the first time on valuation

Conclusion first: Nasdaq 100 ended this week down 2.13%, and combined with last week’s drop, this is the first time since March that it has seen two consecutive weeks of decline. This is not a typical technical pullback; the market is repricing the question of whether “AI capital expenditures can deliver returns,” alongside a surge in oil prices driven by geopolitical tensions in the Middle East, creating a double drag.

Background

In June, the Nasdaq 100 briefly tested a record high of 30,773 points, then entered an “elevator-style” decline. By July 20, it had pulled back more than 4% from its peak. In the week of July 17, the Nasdaq fell 2.9%, marking its largest single-week drop in recent times. This week (as of July 24), both the S&P and Nasdaq have declined for a second straight week, while the Dow has even slipped for a third consecutive week. Market sentiment has shifted from “chasing AI higher” 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 its largest single-week decline since June. On July 24, the Nasdaq Composite fell 0.64% to 24,975.82. The Philadelphia Semiconductor Index dropped 4.25% that day, and was once down more than 3% over the week.

One trigger: Alphabet raised its 2026 capital expenditures to a record high of $205B, renewing doubts in the market about the sustainability of AI spending at such massive scale. The stock price fell more than 7% on the day. Tesla’s Q2 results also came in below expectations; the growth rate of operating expenses outpaced revenue growth, and the stock dropped more than 14% in a single day.

A second trigger: Houthi attacks on Red Sea oil tankers, and rising tensions between Iran and the U.S., pushed Brent crude to briefly break above $100 per barrel—its highest level in seven weeks—raising concerns about an inflation rebound and expectations for rate hikes, thereby suppressing risk appetite.

On valuation, after the Q2 earnings season, Nasdaq 100’s forward price-to-earnings ratio slipped into the low-30x range, below the valuation level at the lows in March. This suggests that this round of adjustment has been driven more by changes in profit expectations and sentiment, rather than a simple burst of a valuation bubble.

Impact

Semiconductor and storage sectors are the key drag behind this pullback. Weakness in the SOX index directly spilled over to the Nasdaq’s overall performance. There are signs of capital rebalancing from highly valued growth stocks toward defensive sectors (such as consumer staples) and the financials. This divergence indicates that the market is not trading a “broad economic recession,” but rather recalibrating the investment return cycle for AI capital expenditures.

Outlook

In the short term, the key level is around 28,200 points (Nasdaq 100). If the weekly close falls below that, there is risk of further downside probing toward around 27,800. If it can reclaim the 28,900–29,000 resistance zone, the adjustment may either pause or end with a healthy pullback. In the medium to long term, Q4 is the key window to test whether AI capital expenditures can be converted into actual earnings. During the Q3 earnings season, cloud computing providers’ capital return rate data will be a core focus.

Risk warning: escalation of the Middle East situation, further increases in oil prices, and a delay in the Federal Reserve’s rate-cut path could all extend the duration of this adjustment. At the same time, investors should be alert to the risk of chain-liquidations by highly leveraged funds in an environment of tightening liquidity. DYOR

#Nasdaq 100 logs its first back-to-back weeks of decline since March