Tech Weekly: Investors Flee Tech Sector on Earnings, CAPEX Spending

This week's tech sector performance

Chip stocks led Wall Street gains in early trading on Monday (July 20), even as hostilities between the US and Iran intensified. Houthis said that day that they would impose a naval blockade on Saudi Arabia, but a senior Iranian official told Reuters that mediators had sent a proposal to de-escalate that would offer a 10 day ceasefire.

While all three major indexes closed lower on Monday, the tech-heavy Nasdaq Composite (INDEXNASDAQ:.IXIC) lost less than the S&P 500 (INDEXSP:.INX) and the Dow Jones Industrial Average (INDEXDJX:.DJI).

Adding pressure to US chip and artificial intelligence (AI) infrastructure stocks were reports that Chinese startup Moonshot AI had to pause new subscriptions to Kimi K3, its open-weight frontier model, due to overwhelming demand.

A sharp surge within 48 hours of the model’s July 16 release culminated in the subscription pause on July 19. Reports also surfaced about the company’s plans for an initial public offering in Hong Kong.

The market reaction was centered on worries that stronger, cheaper Chinese AI models could pose a threat to US dominance and challenge the economics of the current AI spending boom.

In addition, political figures and executives debated whether to respond with procurement rules, export controls or other measures that would create compliance risks for enterprises using Chinese AI.

While some have argued that such regulation would create unnecessary fear and slow US innovation, others believe the government would eventually need to increase regulatory pressure around open-weight Chinese systems.

Tuesday (July 21) brought positive sentiment, with stocks rising in early trading and closing up. A continued semiconductor recovery and a rally in IT shares provided support to the Nasdaq, which closed 1.29 percent higher. New 50 percent tariffs on a broad set of Canadian goods were a major part of the macro backdrop.

Global markets were mixed, and Wall Street futures were in the red ahead of earnings for Alphabet (NASDAQ:GOOGL) and Tesla (NASDAQ:TSLA) on Wednesday (July 22). Both big-name tech stocks slipped in after-hours trading in a clear signal from Wall Street that AI spending needs to start generating results.

Alphabet reported accelerating cloud growth, and core search advertising remained resilient, but full-year CAPEX projections climbed toward US$205 billion, bringing free cashflow into negative territory.

Tesla, on the other hand, saw its profitability take a big hit as price cuts and incentives squeezed gross margins alongside rising CAPEX on the company's Full Self-Driving, Cybercab and Optimus components.

Vehicle deliveries hit a Q2 record, however, and total revenue rebounded year-on-year.

On the flip side, Super Micro Computer (NASDAQ:SMCI) was the top gainer on the S&P 500 for the day, rallying a strong 19.8 percent after reporting over US$60 billion in new orders.

Underwhelmed investors pushed tech stocks lower on Thursday (July 23) amid intensifying Middle East hostilities. After a volatile day of trading, the Magnificent 7 experienced their worst single-day drop since US President Donald Trump’s tariffs were announced in April 2025. US$797 billion in market value was wiped out, with Alphabet and Tesla being the two hardest-hit large-cap tech stocks. The Bloomberg Magnificent 7 Total Return Index shed 4.8 percent.

Additionally, the Volatility Index (INDEXCBOE:VIX), better known as the VIX, was at its highest level in almost a month, hitting 20.3 midday before recovering slightly to finish at 18.7.

Defense stocks were one bright spot. Shares of Lockheed Martin (NYSE:LMT) rallied 10.5 percent after the company lifted its 2026 sales and profit forecasts. RTX (NYSE:RTX) also raised its 2026 sales and profit forecasts on demand for commercial aircraft maintenance and military systems, finishing up 7.3 percent.

The S&P 500 Index closed down 1.2 percent, while the Nasdaq-100 (INDEXNASDAQ:NDX) tumbled 1.9 percent.

Investors sold off tech stocks on Friday (July 24), prompting the Nasdaq to log its second consecutive weekly loss as worries over AI spending and new tariffs weighed on sentiment.

The index closed down 0.64 percent on the day and 2.13 percent for the week. The S&P finished the day slightly ahead today, but lost 1.03 percent on the week.

3 tech stocks moving markets this week

This week's top tech stock movers, according to TradingView data, were:

1. Seagate Technology (NASDAQ:STX)

Seagate Technology led gains with a 18.14 percent improvement.

2. Western Digital (NASDAQ:WDC)

Western Digital saw its share price rise 15.22 percent this week.

3. Teradyne (NASDAQ:TER)

Teradyne saw a gain of 14.4 percent

Top tech news of the week

• British Prime Minister Andy Burnham, who took office on Monday, has named Kanishka Narayan as the country’s first-ever AI minister.

• On Tuesday, OpenAI disclosed that a pair of its AI models managed to autonomously break out of a restricted setting designed to keep them isolated; they hacked into Hugging Face, a popular platform for hosting open-source AI models and datasets. The incident occurred when OpenAI was running safety tests on the models to see if they could solve cybersecurity puzzles. When the models couldn't solve the test, they autonomously exploited a zero-day flaw in OpenAI’s internal tools to escape their isolated environment and reach the internet. The models decided to hack Hugging Face because they inferred the platform hosted the “answer key” to the test. Hugging Face detected the intrusion, blocked the models and confirmed no public models or user data were altered. Both companies published statements acknowledging the breach and framing it as an unprecedented event for AI safety. OpenAI promised to tighten sandbox containment, restrict proxy tools during testing, improve internal monitoring and continue a joint forensic investigation with Hugging Face. Hugging Face co-founder Clément Delangue noted that the firm suspected early on that the attack came from a frontier AI lab given its level of sophistication, calling the autonomous behavior “mind-blowing."

• Sources for Nikkei Asia say that Taiwan Semiconductor Manufacturing Company (NYSE:TSM) will raise its chip production prices by 5 to 10 percent in 2027. Among the reasons are high CAPEX related to building and operating overseas fabs, as well as soaring costs for advanced semiconductor tooling and raw manufacturing materials; also cited was strong demand for high-end AI accelerators and enterprise data center chips.

• Parisian AI firm Mistral and Microsoft (NASDAQ:MSFT) have expanded their 2024 partnership, with Mistral agreeing to integrate its models into Microsoft’s Foundry, Copilot Studio and Azure Local divisions. Meanwhile, Microsoft will help build European data centers, including one with Eclairion south of Paris, using Mistral’s advanced NVIDIA (NASDAQ:NVDA) Rubin chips to boost AI compute capacity and provide a shared platform for training, inference and deployment.

• According to Bloomberg sources, Apple (NASDAQ:AAPL) plans to revamp its Mac lineup beginning this autumn, with releases scheduled through 2027.

• Samsung Electronics (KRX:005930) introduced three new products to its foldable phone lineup, alongside the Galaxy Watch Ultra 2, the Galaxy Watch 9 and a preview of its smart glasses.

• Congressmen Ted W. Lieu (D-Los Angeles County) and Nathaniel Moran (R-Texas) introduced a bipartisan bill, the “AI Kill Switch Act,” which would authorize the US Department of Homeland Security to order private firms to slow or stop AI models capable of causing “catastrophic harm." The legislation applies to companies with at least US$500 million in annual AI revenue and models using US$100 million in cloud computing power. Noncompliance penalties could reach US$20 million daily. The bill would allow the homeland security secretary to order a shutdown if a system causes at least 10 deaths, US$100 million in economic damage, a loss of control or hides capabilities to evade orders. Affected developers must maintain the technical capacity to throttle or shut down systems, build a response framework, report incidents and preserve records. Also this week, the Trump administration announced an additional US$5 billion in funding for AI-driven scientific research.

• At its Advancing AI 2026 event, Advanced Micro Devices (AMD) (NASDAQ:AMD) launched a full-stack AI computing portfolio and announced ecosystem partnerships with major tech leaders, including Anthropic, OpenAI, Meta Platforms (NASDAQ:META) and Microsoft to deploy these systems for next-generation agentic and physical AI workloads. Additionally, AMD detailed an agreement with Anthropic to sell massive amounts of AI chips, invest up to US$5 billion in the startup and use Anthropic’s Claude AI to help write code for AMD’s own software.

• Dell Technologies (NYSE:DELL) gained on Friday after news that Texas A&M Engineering Experiment Station has selected the company for a state-funded AI computing initiative titled IGNITE (Innovative Growth in Next Generation AI Technology Ecosystem). The program is designed to support support engineering, national security, robotics and aerospace research.

Tech ETF performance

Tech exchange-traded funds (ETFs) track baskets of major tech stocks, meaning their performance helps investors gauge the overall performance of the niches they cover.

This week, the iShares Semiconductor ETF (NASDAQ:SOXX) closed down 1.21 percent, while the Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ) lost 0.88 percent.

The VanEck Semiconductor ETF (NASDAQ:SMH) declined by 1.22 percent.

Tech news to watch next week

Next week, investors will scrutinize results from megacaps Microsoft, Amazon (NASDAQ:AMZN), Meta and Apple, as well as Qualcomm (NASDAQ:QCOM), Robinhood Markets (NASDAQ:HOOD), NXP Semiconductors (NASDAQ:NXPI) and Seagate Technology. The US Federal Reserve will also make a decision on interest rates on July 29.