U.S. stocks were mixed on Monday. The Dow Jones Industrial Average rose 0.51%, the S&P 500 added 0.02%, and the Nasdaq Composite slipped 0.18%. Weakness in chipmakers, memory stocks and optical networking names dragged on the Nasdaq, while traditional consumer plays, parts of the software sector and Chinese ADRs held up better.
Oil drops as Washington leaves room for talks with Iran
Crude prices fell after Donald Trump said the United States had paused strikes on Iran to give negotiations another chance, though he also warned that strong military action would resume if talks failed.
WTI crude fell below $80 and was down 12% for the week. Brent dropped below $85, with a weekly loss near 10%. Traders had previously priced in the risk of a broader U.S.-Iran conflict and possible disruption around the Strait of Hormuz. Once Washington signaled a willingness to talk first, positions tied to rising oil prices began to unwind.
That did not remove the broader risk. Israeli Prime Minister Benjamin Netanyahu had already arrived in the United States for a meeting with Trump, with Iran’s nuclear program still central to the agenda. At the same time, Yemen’s Houthi movement said it had struck Saudi oil facilities, while Saudi authorities intercepted multiple drones. For now, the move in oil looked more like a pullback in war premium than an end to Middle East risk.
Fed meeting becomes the main event
The dollar was little changed and rebounded from intraday lows. Morgan Stanley said investors increased long-dollar and short-pound positions ahead of meetings at the Federal Reserve and the Bank of England, a sign of defensive positioning into central bank risk.
In rates, the 10-year U.S. Treasury yield fell about 3 basis points to 4.63%. The drop in oil prices eased inflation worries and helped long-end yields move lower.
The market’s attention now centers on this week’s Fed decision. Most investors still expect no change, but some traders are betting on a surprise 25-basis-point rate increase. Trump kept up pressure on the Fed, saying the U.S. should have the world’s lowest rates, and described Fed Chair Warsh as “very outstanding,” while saying other board members were holding him back.
Citadel Securities offered a much more aggressive call, saying the Fed could surprise markets with a rate hike this week. In its view, a hike would strengthen Warsh’s inflation-fighting credentials and signal that the Fed is no longer inclined to guide the market so heavily in advance. Evercore ISI took a more cautious line, saying a hike immediately after improving inflation data would look unusual, but uncertainty tied to Middle East tensions and oil prices meant the possibility could not be ruled out entirely.
Over the next two days, investors are not only watching whether the Fed moves. They are also focused on what Warsh says afterward. A hawkish press conference could push the dollar and Treasury yields higher and keep pressure on tech shares. A softer tone could give equities some room to recover.
AI software outperforms as hardware names sell off
Monday’s session showed a clear split inside the AI trade. Application software names turned into a shelter for capital. Shopify jumped more than 11%, Palantir gained 7%, SAP SE and ServiceNow rose close to 7%, Salesforce climbed more than 6%, and both Adobe and AppLovin advanced more than 5%.
Investors have started to favor lighter-asset businesses and companies closer to customer budgets on the AI application layer. Hardware was hit across the board. Memory, optical networking, semiconductor equipment and AI chip names all came under pressure. The Philadelphia Semiconductor Index fell 2.23%, while a semiconductor ETF declined about 2.25%. Memory and optical communication shares dropped even more sharply.
UBS said credit markets are re-pricing the long-term monetization risk tied to AI capital expenditure. Amazon’s July investment-grade bond deal was covered only 1.6 times, far below 3.4 times in March. UBS also estimated that combined fiscal 2026 capex across six hyperscalers — Alphabet, Amazon, Microsoft, Meta, Oracle and CoreWeave — has reached about $849 billion, with a path to more than $1 trillion in 2027. Investors are demanding a higher risk premium, and that sits behind the pressure on Nvidia and the wider semiconductor group.
China memory and lithography headlines add another catalyst
Developments tied to China’s memory and lithography industries added to the selloff in semiconductor shares.
ChangXin Technology surged more than 465% on its debut, lifting its market value above RMB 3 trillion and prompting investors worldwide to reassess the long-term DRAM supply outlook. Separately, The Information reported that a Chinese company has started small-batch production of immersion DUV lithography systems, with plans to deliver five units this year and produce about 20 annually by 2027. That hit ASML and other equipment names.
Not everyone saw this as a fundamental turning point. Citrini analysts said progress in Chinese DUV was not surprising and that the selloff in ASML looked somewhat excessive. Bernstein analyst Mark Li also said the pullback in memory stocks could create a new entry point because high-end AI memory such as HBM still carries high barriers to entry, leaving leading global vendors with a near-term advantage.
Apple overtakes Nvidia again
Apple rose 1.17%, pushing its market value to nearly $5 trillion and putting it back ahead of Nvidia as the world’s most valuable company for the first time since April 2025. One reason investors favored Apple was its more restrained approach to AI spending. Rather than build data centers aggressively, Apple has leaned more on rented compute capacity. In a market increasingly worried about excessive AI capex, that lower-burn model has become more attractive.
Apple is scheduled to report earnings after the close on Thursday. Investors will be focused on iPhone demand, services revenue, progress on AI features, and whether the company continues to maintain discipline on capital spending.
Among the other Mag7 names, Microsoft rose 1.94% after releasing its first cybersecurity model, MAI-Cyber-1-Flash, aimed at lowering vulnerability-scanning costs. Google added 2.13% as the White House pressed it to finalize a voluntary AI review framework before Aug. 1. Amazon slipped 0.31% after announcing a deployment plan for 5,000 satellites, directly challenging Starlink. Meta fell 0.22%, and Tesla lost 1.22%.
Nvidia, SanDisk, SK Hynix and ASML lead the declines
Nvidia dropped 4.99% as investors questioned the financing behind AI infrastructure expansion. Its credit default swap cost posted the largest single-day rise on record. Pressure came from both ends: the sheer size of AI infrastructure projects has raised concern over debt, vendor financing and circular transactions, while “The Big Short” investor Michael Burry increased his short positions in Nvidia and Micron and predicted a 30% correction in semiconductors. AMD fell 5.17% and TSMC lost 1.03%.
SanDisk plunged 11.02%, making memory one of the hardest-hit groups of the day. ChangXin Technology’s post-listing surge raised concern that China’s DRAM capacity and capital support could reshape the traditional supply structure. With memory shares already having rallied sharply, profit-taking accelerated the move. Western Digital and Seagate each fell more than 4%, and Micron lost 2.25%.
SK Hynix fell 7.47%, dropping below its $149 issue price. The company had been one of the key winners of the AI memory boom, but even with long-term HBM demand still seen as solid, investors are now more focused on stretched valuations, oversized gains and faster competition from China.
ASML dropped 5.80% after media reports said a Shanghai-based company had begun small-batch production of immersion DUV systems, with five deliveries planned this year and annual output of about 20 units by 2027. The scale is still limited and does not threaten ASML’s position in the short term, but it reminded the market that China is pushing ahead with domestic semiconductor equipment. Citrini analysts said the reaction may have gone too far because the progress was not wholly unexpected and the tools remain in an early stage. Applied Materials and Lam Research each fell about 4%.
Software gains, while space and optical networking remain under pressure
Palantir rose 7%. Citi lowered its price target to $200 but sharply increased its 2027 revenue forecast, and investors chose to look past valuation concerns as the company’s underlying growth accelerated. Software shares broadly strengthened, with Shopify up more than 11%, Salesforce and ServiceNow rising close to 7%, and Adobe gaining more than 5%.
SpaceX fell 1.36% as the market continued to question the valuation of its AI business. Axe Compute rose 5.26% after an AI-focused investment fund led by Yi Lihua and his team named the company in its latest report as an undervalued U.S.-listed entry point into AI compute, calling it one of the more elastic names in the “assetization” wave around AI compute.
Space extended its decline, down 1.36% to a fresh low of $108.66. Investors are worried about slower Starlink user growth, uneven progress in Starship test flights, and heavy spending on AI and space-compute operations. Morgan Stanley said that if the stock falls to $100, the market would effectively be assigning zero value to its AI option, which in its view would make the current level a deeply mispriced buying opportunity.
Corning lost more than 2%, with investors watching its earnings call later in the day for commentary on AI server glass substrates, optical communication, display materials and data-center hardware demand. The optical networking group was weak throughout Monday’s session: Lumentum dropped nearly 7%, Coherent fell nearly 4%, and Marvell, Corning and Credo each lost more than 2%. Strong guidance from Corning could ease some pressure on the AI hardware chain. Weak guidance could keep the group under strain.
What markets are watching next
On Tuesday, July 28, investors will watch Netanyahu’s meeting with Trump, with Iran’s nuclear program and any progress toward a Middle East ceasefire at the center of attention. If both sides strike a harder line, oil and gold could rebound. If they continue to push negotiations, oil may remain under pressure.
A heavy earnings slate is also due Tuesday, including Corning, Boeing, Coca-Cola, UPS and Royal Caribbean. The market is watching Boeing’s delivery recovery, Coca-Cola’s consumer resilience, UPS logistics demand, Corning’s exposure to AI hardware and optical networking, and Royal Caribbean’s view of travel demand. Corning’s second-quarter earnings call is scheduled for 20:30 Beijing time and is seen as an important read-through for AI server glass substrates, optical communication, display materials and data-center hardware demand.
On Wednesday, July 29, SK Hynix is due to report second-quarter earnings at 08:00. The market expects record operating profit, with the focus on HBM shipments, AI server demand, NAND pricing and second-half guidance. Strong results could support the global memory supply chain. A more cautious demand outlook from management could extend the correction in chip stocks.
Other companies set to report or host calls that day include Seagate, Western Digital, Ford, Visa, KLA, NXP Semiconductors, Skyworks, Teradyne, Bloom Energy, Procter & Gamble, Vertiv, Amphenol and SK Hynix. Investors will be watching Seagate and Western Digital in particular for their views on enterprise storage, NAND pricing and AI data-center storage demand.