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

Nasdaq falls for two straight weeks, and the AI narrative faces its first real valuation challenge

Conclusion first: the Nasdaq 100 closed down 2.13% this week, and combined with last week’s decline, it marks the first time since March that it has posted back-to-back weekly losses. This is not a routine technical pullback; the market is repricing the question of whether “AI capital expenditures” can deliver returns, with added pressure from Middle East geopolitical conflict that lifts oil prices—resulting in a double squeeze.

Background

In June, Nasdaq 100 briefly touched a record high of 30,773. After that, it entered an “elevator-style” selloff, and by July 20 it had retreated more than 4% from the peak. For the week of July 17, the Nasdaq fell 2.9%, setting the largest weekly drop recently. This week (through July 24), both the S&P and the Nasdaq have posted two consecutive weeks of declines, while the Dow has fallen for a third straight week. Market sentiment has shifted from “chasing AI” to “reassessing valuation and the quality of cash flows.”

Data and logic

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

One trigger: Alphabet raised 2026 capital expenditures to a maximum of $205 billion, reigniting doubts about the sustainability of AI spending at such mega-scale companies; the stock fell more than 7% that day. Tesla’s Q2 results missed expectations; the growth rate of operating expenses outpaced that of revenue, and the stock fell more than 14% in a single day.

A second trigger: Houthi attacks on Red Sea oil tankers and heightened tensions between Iran and the United States. Brent crude briefly broke above $100 per barrel—its highest in seven weeks—raising concerns about an inflation rebound and renewed rate-hike expectations, which suppressed risk appetite.

On valuation, after the Q2 earnings season, the Nasdaq 100’s forward P/E multiple fell to around the 30x range, below the valuation level at the March lows. This suggests the current correction is driven more by earnings expectations and sentiment than by a simple “valuation bubble burst.”

Impact

Semiconductors and memory-related stocks have been the core drag behind this decline. Weakness in the SOX index directly spilled over into the Nasdaq’s overall performance. There are signs of capital rotating from high-valuation growth stocks toward defensive sectors (such as consumer staples) and toward financials. This divergence implies the market is not trading a “full-scale economic recession,” but rather recalibrating the investment payback 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 that, there is a risk of further downside toward about 27,800. If it can reclaim the 28,900–29,000 area, the adjustment may pause—or at least look like a healthy pullback. In the medium to long term, Q4 is the key window to test whether AI capital expenditures can translate into actual profits. During the Q3 earnings season, capital return rate data from cloud-computing firms will be a central watch item.

Risk warning: an escalation of the Middle East situation, further increases in crude oil prices, and a delay to the Fed’s rate-cut path may all extend the duration of this adjustment. At the same time, investors should also watch for chain-liquidation risks from highly leveraged funds in an environment of tightening liquidity. DYOR

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