The AI Rally Just Changed

👋 ICYMI

For twelve weeks, the rally was led by technology. This week, the market told a different story.

The Nasdaq Composite posted its fifth consecutive losing session on Friday and fell 4.6% for the week — its worst weekly performance since early March, when the Iran war was at its most intense. The S&P 500 dropped roughly 2% to 7,354. But the Dow — now including Alphabet $GOOG ( ▼ 2.19% ) after it replaced Verizon $VZ ( ▲ 1.02% ) this week — gained 0.6% and traded near record highs. The divergence between the Dow and Nasdaq — over five full percentage points — was the widest in months and signals a meaningful shift in market leadership.

The catalyst for the tech selloff wasn't one event — it was several converging at once. SpaceX $SPCX ( ▲ 0.15% ) shares continued to slide from their IPO highs. A New York Times $NYT ( ▲ 3.37% ) report said OpenAI is considering delaying its IPO to next year because of SpaceX's poor post-debut performance and broader volatility in AI-related shares. JPMorgan $JPM ( ▼ 1.81% ) warned that the delay could raise concerns about "sustainability of infrastructure spending given the delay in funding from the capital markets." Chipmakers sold off across the board despite Micron $MU ( ▼ 6.69% ) reporting the strongest quarter in its history.

Oil told the opposite story. Brent crude fell to $73.74 on Wednesday and WTI dropped below $70.34 — their lowest levels since before the U.S. and Israel first struck Iran on February 28. The peace deal is working: oil tankers continued crossing the Strait of Hormuz despite Trump accusing Iran of firing attack drones at ships on Friday.

🔁 Market Movers

• 📊 Micron's Quarter of a Lifetime — Then the Market Shrugged

  Revenue of $41.46 billion (+346% YoY). Adjusted EPS of $25.11 (24% beat). Gross margin of 84.9% — a company record. Free cash flow of $18.3 billion — a quarterly record. Q4 guidance of $50 billion in revenue ($6.4 billion above consensus) and 86% gross margins. Sixteen long-term customer agreements signed, with $22 billion in committed cash deposits. CEO Sanjay Mehrotra said the company has generated as much cumulative cash flow in the last two quarters as in its entire 47-year history. And yet the stock fell 6.7% on Friday. That tells you everything about this week's market psychology.

• 📉 Nasdaq Posts Worst Week Since March — Five Straight Down Days

  The Nasdaq fell 4.6% on the week, with five consecutive losing sessions — the first time that's happened since the war began in March. Alphabet fell 5% on Monday despite being added to the Dow. Amazon $AMZN ( ▲ 2.5% ) , Meta $META ( ▲ 1.36% ) , and Nvidia $NVDA ( ▼ 1.64% ) all declined sharply. The semiconductor ETF (SMH) fell over 5% for the week. Meanwhile, healthcare led the S&P 500, with Bio-Techne $TECH ( ▲ 0.42% ) up 22% and Incyte $INCY ( ▲ 5.78% ) up 15%. Investors rotated aggressively into industrials, healthcare, and consumer staples — Colgate-Palmolive $CL ( ▲ 1.11% ) gained 4%, Coca-Cola $KO ( ▲ 2.75% ) 3%, Eli Lilly $LLY ( ▲ 7.13% ) 7%.

• 🛢 Oil Crashes to Pre-War Levels

  Brent crude touched $73.74 and WTI fell below $70.34 on Wednesday — both at levels not seen since before the February 28 strikes that started the Iran war. The 10-year Treasury yield fell below 4.5% in response, easing the "higher for longer" pressure that has constrained equity valuations for months. This is the single most important macro development of the week — falling oil simultaneously reduces inflation risk, eases consumer pressure, and gives the Fed room to pause on hikes.

• 🥇 Gold Falls Below $4,000 for First Time in 7 Months

  Gold futures dipped below $4,000 on Wednesday — their first close below that level since November 2025. The selloff was driven by the tech rout forcing liquidation across asset classes, a stronger dollar on falling oil, and diminishing safe-haven demand as the Iran war winds down.

• 🤖 OpenAI May Delay IPO to 2027

  The New York Times reported that OpenAI is considering delaying its planned IPO to next year, citing SpaceX's weak post-IPO stock performance and broader uncertainty in AI-related shares. JPMorgan warned the delay could raise questions about "sustainability of infrastructure spending given the delay in funding from the capital markets." If OpenAI — the most anticipated AI IPO after SpaceX — steps back from the market, it could signal that the window for loss-making AI companies to go public is closing.

👀 Signals I'm Watching

• 🔄 The Rotation Is Real — And May Have Legs

  The Dow gained 0.6% while the Nasdaq fell 4.6% — a 5+ percentage point divergence that signals a meaningful shift in market leadership. Industrials, healthcare, and consumer staples outperformed technology and semiconductors for the first time since the rally began in March. Goldman Sachs' John Flood said the market is "still in buy dip mode" and called retail investors the "most consistent" equity buyers of 2026. If oil stays below $80, falling yields could further support the rotation into rate-sensitive sectors like utilities, REITs, and banks.

• 📉 Oil Below $75 Changes the Fed Calculus

  Oil at pre-war levels is the best news the Fed has received all year. If Brent stays below $80 through July and August, headline CPI could fall sharply — potentially taking the 3.3% March reading back toward 2.5–2.8% by late summer. That would give Warsh room to hold rates rather than hike, and could shift the market's pricing from "67% chance of a hike" back toward neutral. The March CPI jump was almost entirely energy-driven — if oil reverses, so does the inflation story.

• ⚠️ SpaceX's Weakness Is a Broader Signal

  SpaceX has declined steadily since its IPO, and OpenAI is now reportedly using that weakness as a reason to delay its own listing. If the two most anticipated AI-adjacent IPOs of the decade can't sustain public-market enthusiasm, it raises a question that JPMorgan flagged this week: is the $600 billion in hyperscaler capex commitments sustainable without a steady flow of new capital from the public markets to fund the application layer?

• 📊 Micron's Numbers Say AI Is Accelerating — The Market Says "Not Yet"

  Micron reported $25 billion in data-centre revenue in a single quarter, quadrupled its overall revenue, and guided to $50 billion next quarter. And the stock fell 6.7% the next day. This is the clearest signal yet that the market has moved from rewarding AI growth to demanding it at cheaper valuations. Micron's fundamentals have never been stronger — but at current multiples, even record-breaking results aren't enough to sustain further upside when positioning is this crowded.

⚠️ Red Flag to Note

The Ceasefire Is Being Tested in Real Time

Trump accused Iran on Friday of firing attack drones at ships transiting the Strait of Hormuz — a direct violation of the peace deal signed just ten days ago. Oil tankers are continuing to cross despite the attacks, but the fragility of the truce is evident. The market has fully priced out the war premium — Brent is at pre-war levels and the VIX is at 19. If the ceasefire collapses and the Strait closes again, the repricing would be violent precisely because the market has moved on. The 60-day MoU window runs through mid-August. Every week between now and then carries implementation risk that the market is no longer hedging for.

🔍 Insider Transactions I’m Watching

📬 Closing Note

This week felt different. And it was. For three months, the playbook was simple: buy technology, ride the AI wave, and trust that the war would end. That trade worked spectacularly — the Nasdaq rallied over 25% from its March lows, Micron joined the trillion-dollar club, and Intel posted its best day in history.

But this week, the market rotated. The Nasdaq fell 4.6% while the Dow gained 0.6%. Healthcare, industrials, and consumer staples led. Gold fell below $4,000. Oil crashed to pre-war levels. And OpenAI — the company that was supposed to be the next SpaceX-sized IPO — reportedly told its board it may wait until 2027.

None of this means the AI trade is over. Micron just reported $41.46 billion in revenue and guided to $50 billion. Data-centre demand is so strong that supply won't catch up until 2028. But the market is telling you something important: after a 25% rally, the easy money has been made. From here, the returns will go to investors who can distinguish between companies genuinely benefiting from AI and those that simply carry the label.

The good news is that the macro backdrop is improving rapidly. Oil below $75 means inflation should decelerate. Falling yields mean rate hike odds should fade. And the peace deal — fragile as it is — continues to hold, with tankers crossing the Strait despite Iranian provocations.

The rotation isn't a warning. It's a sign of health. Markets that broaden are more durable than markets that narrow. And for the first time in months, the rally is broadening.

Stay patient. Stay selective. And let the data guide the story.

Until next Sunday,

—George ☕