Oil prices break $100, AI cools off, Nasdaq 100 loses more than 5% in two weeks

Nasdaq slides for two straight weeks; the AI narrative faces its first real pricing challenge

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

Background

In June, Nasdaq 100 briefly tested the all-time high of 30,773. After that, it entered an “elevator-style” decline. By July 20, it had already pulled back more than 4% from its peak. In the week of July 17, the Nasdaq fell 2.9%, posting the largest single-week drop in recent times. This week (as of July 24), both the S&P and Nasdaq have logged two consecutive weeks of declines, while the Dow has even slipped for a third straight week. Market sentiment shifted from “chasing AI” to “reassessing valuations and the quality of cash flows.”

Data and logic

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

One trigger: Alphabet raised its 2026 capital expenditures to a record high of $205 billion. The market again questioned the sustainability of AI spending at such an enormous scale, and the stock fell more than 7% on the day. Tesla’s Q2 results missed expectations; its 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 cargo ships, along with escalating 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 a resurgence in inflation and expectations of further rate hikes, which suppressed risk appetite.

On valuation, after the Q2 earnings season, Nasdaq 100’s forward P/E fell into the around-30x range, below the valuation level at the March lows. This suggests the current pullback is driven more by profit expectations and sentiment than by a pure “valuation bubble” bursting.

Impact

Semiconductors and memory-related sectors are the main drag behind this round of declines. Weakness in the SOX index directly spilled over into the Nasdaq’s overall performance. Money appears to be rebalancing from high-valuation growth stocks toward defensive sectors (such as consumer staples) and the financial sector. This divergence signals 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 (Nasdaq 100). If the weekly close falls below it, there is risk of further downside toward roughly 27,800. If it can reclaim the 28,900–29,000 area, the adjustment could either pause or end as a healthy pullback. In the medium to long term, Q4 is a crucial window to test whether AI capital expenditures can translate into actual profits. During the Q3 earnings season, cloud computing providers’ capital return rate data will be a key observation metric.

Risk warning: An escalation of the Middle East situation, further increases in oil prices, and the Federal Reserve pushing back its rate-cut path could all extend the duration of this adjustment. At the same time, investors should also watch for the risk of cascading forced liquidations from highly leveraged funds in a tightening-liquidity environment. DYOR

#Nasdaq 100 logs its first back-to-back weekly decline in three months