The AI rotation stole the spotlight from a strong start to earnings season
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- IBM pre-announced disappointing Q2 results on Tuesday, sending shares down 25% in their worst day on record; CEO Arvind Krishna said customers are redirecting technology budgets toward cybersecurity, hardware, and AI tokens
- SK Hynix's U.S. debut on July 10 sparked a broad sell-off across the AI infrastructure trade, with the stock falling 9% Monday, Sandisk tumbling 12%, Intel losing 6%, and AMD declining 4%
- CrowdStrike and Palo Alto Networks rallied roughly 12% and 7% respectively on Tuesday as IBM's commentary reinforced that AI is driving incremental cybersecurity demand
- Apple climbed to record highs after securing approval to bring Apple Intelligence to China using Alibaba's AI models, and on Friday briefly surpassed Nvidia as the world's most valuable company
- ASML raised its full-year sales outlook for the second time this year and TSMC boosted its capital spending forecast, but investors largely overlooked those demand signals
- The VanEck Semiconductor ETF (SMH) dropped nearly 9% for the week, marking its third weekly decline in the past four; the S&P 500 fell nearly 1.6% and the Nasdaq lost almost 3%
- Goldman Sachs delivered standout Q2 results fueled by investment banking and trading, with shares closing at a record high, while Wells Fargo beat earnings and revenue expectations
Why it matters: IBM's 25% plunge and the VanEck Semiconductor ETF's 9% weekly drop show investors questioning whether AI infrastructure stocks ran too far, too fast - but the 12% rally in CrowdStrike confirms AI-driven enterprise spending is still accelerating, just flowing to different layers of the stack. The week's net move was capital reshuffling rather than an AI-thesis break, with traditional software (Salesforce, ServiceNow) and unprofitable chip names taking the brunt.
