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Following a sharp selloff the previous trading day, Wall Street saw a strong rebound. Microsoft’s significantly better-than-expected earnings report reignited investor confidence in AI, driving a broad return of capital to the technology sector. The Dow Jones Industrial Average rose 1.19%, the S&P 500 gained 1.66%, and the Nasdaq Composite surged 2.78%, while the Nasdaq 100 jumped 3.36%, marking its third-largest single-day gain this year. The VIX volatility index plummeted 17.33% to 17.08.
Under the theme of peace, markets anticipate the OPEC+ meeting
The geopolitical situation in the Middle East has seen a dramatic development, with Trump announcing that Hamas has provisionally agreed to complete disarmament, and Israel will gradually withdraw its forces as the agreement progresses. If finalized, this would represent the most significant political breakthrough since the outbreak of the Gaza conflict. However, the agreement still requires formal signing, and major differences remain among Israel, Hamas, Iran, and other parties, with markets closely monitoring execution risks.
Meanwhile, Iran announced a drone strike on the U.S. air base in Bahrain, claiming damage to base facilities; Saudi Arabia, together with 43 countries, is pushing to establish a maritime defense alliance to enhance shipping security in the Red Sea, the Strait of Mandeb, and the Gulf of Aden. Although diplomatic breakthroughs have emerged in the Middle East, military risks have not been fully eliminated.
Crude oil faced slight pressure, with WTI falling about 2% to $80.5 per barrel, as markets focused on the upcoming OPEC+ meeting, with traders remaining cautious about the group’s compliance with production increases. ING strategists noted that the biggest uncertainty for crude oil before 2027 remains the direction of OPEC+ policy and whether member countries will resist adhering to production quotas. Markets anticipate that OPEC+ may announce a daily production increase of 188,000 barrels in September, causing bulls to hold back from pushing prices higher for now.
The U.S. dollar is "strangled by a Japan-South Korea alliance," with the yen surging 3.3% intraday.
On Thursday, the U.S. Dollar Index plunged 0.9%, posting its largest single-day decline since the beginning of the year, erasing all gains accumulated since Wash's debut.
Notably, Japan and South Korea are suspected by the market of coordinating currency interventions.
Nikkei reported that the Japanese government and the Bank of Japan may have intervened by buying yen and selling dollars, while U.S. monetary authorities also conducted a "currency check" prior to the intervention. South Korea was also revealed to have unusually sold dollars, causing the won to appreciate 2% to its highest level in nine months; the yen rose as much as 3.3% against the dollar during trading, marking its largest intraday gain since December 2023.
Microsoft's earnings report reverses skepticism over AI spending, with Feeban surging 8% in a single day, the largest gain in four months.
Microsoft’s earnings report became a pivotal turning point in addressing skepticism about AI spending. Microsoft Azure’s revenue grew 43% at constant exchange rates, significantly surpassing analysts’ expectations of 39.6% to 40% and helping the company achieve its first-ever annual Azure revenue exceeding $10 billion, making it the second cloud provider after Amazon AWS to reach this milestone.
Crucially, Microsoft’s capital expenditures came in below expectations, and the company committed to maintaining positive cash flow in fiscal year 2027, directly dispelling prior market concerns about the sustainability of AI investments. Boosted by this news, Microsoft’s stock surged 15.51%, adding approximately $450 billion in market value in a single day—exceeding NVIDIA’s previous record of $440 billion in single-day market cap growth and becoming the largest single-day market cap increase in U.S. stock history.
The semiconductor and memory sectors became the strongest β drivers of this rally, with the Philadelphia Semiconductor Index surging 8.19% to record its largest single-day gain in months, and the Roundhill Memory ETF skyrocketing nearly 17%. SanDisk, Micron, SK Hynix, Western Digital, and Seagate all surged sharply as markets bet that demand for HBM, NAND, and DRAM from AI data centers will continue to expand. Additionally, Leopold’s “Situational Awareness” fund, managed by the so-called “AI Guru,” faced a margin call due to leveraged bets on AI and was forced to sell approximately $16 billion in secondary market holdings. Citadel stepped in within 24 hours, not only avoiding a cascading sell-off but also triggering mechanical short-covering that further fueled the market rebound.
Despite the technology sector rising more than 5%, market breadth remains weak. Over 70% of the components in the S&P 500 closed lower, and the equal-weighted S&P 500 index declined, showing a rare divergence of over 75 basis points from the benchmark index. Bloomberg strategists noted that such a divergence has occurred only twice since 1990, with the previous instance occurring on June 30, 2000, just before the peak of the Nasdaq tech cycle. SpotGamma also warned that the S&P 500 remains in a negative Gamma environment, with resistance at 7,450 and support at 7,300. If the index breaks below 7,300, there is virtually no positive Gamma support from 0DTE options between 7,300 and 7,000, suggesting that this rally is driven more by short squeezes than by a genuine return of risk appetite—investors should remain vigilant about concentration risk.
Specific project actions and stock price fluctuations:
Microsoft surged 15.51%, posting its largest single-day gain in 18 years, with its market value rising by $450 billion in one day—a record high. The company’s Q4 cloud revenue from Azure grew a robust 43%, significantly exceeding expectations, and it provided optimistic guidance on disciplined capital spending and positive cash flow in the upcoming fiscal year. The Tech Seven Index rose 2.28%, with NVIDIA up 2.65%, Amazon up 3.90%, and Tesla up 3.53%. However, Meta fell 7.95%, Apple declined 1.41%, and Google A dropped 0.91%.
Cloud computing sector surges: New cloud provider NEBIUS rockets 27.13%, CoreWeave jumps 21.51%, Oracle rises 8.34%, and Amazon increases 3.9%.
Semiconductor and memory sectors surge sharply: The Philadelphia Semiconductor Index rose 8.19%, the Semiconductor ETF gained 6.88%, and the Roundhill Memory ETF climbed nearly 17%. Micron Technology surged 18.32%, SanDisk jumped 25.99%, SK Hynix rose 17.52%, Western Digital increased over 15%, and Seagate Technology climbed over 11%. Lam Research surged 18.36%, Astera Labs rose 20%, Applied Materials gained 17.98%, AMD advanced 13%, and Intel climbed 11.3%. TSMC is reportedly developing an advanced packaging technology similar to Intel’s EMIB; Arm rose over 7%, TSMC ADR increased 7.64%, and Marvell Technology climbed over 12%.
Optical communication stocks rallied: Applied Optoelectronics rose nearly 18%, Lumentum gained over 15%, Credo increased more than 13%, Coherent rose over 12%, and Corning climbed 9%.
Meta plunged 7.95% against the market: Despite near $700 billion in future spending commitments, high capital expenditures and cash flow pressures have raised investor concerns, as growth pathways beyond advertising remain unproven.
Amazon rose 3.90% during trading and gained over 10% after hours: AWS cloud revenue surged 37% quarter-over-quarter to $42.2 billion, reaching a new high in 18 quarters. CEO Andy Jassy stated that AWS is entering a new growth phase, with AI services, the company’s custom Trainium chips, and enterprise AI applications serving as key future growth drivers. AWS has now become a major source of Amazon’s profitability, and its AI infrastructure investments are gaining market recognition. However, Amazon still faces pressure on capital expenditures, as the company has raised its full-year capital spending guidance; the market will continue to monitor whether AI investments can sustainably translate into profit growth.
Apple shares fell 1.41% during trading and dropped nearly 7% after hours: Cook bid farewell to a quarter where performance beat expectations, but expectations were missed. Quarterly revenue reached $109.417 billion, up 16% year-over-year, and earnings per share came in at $2.02, both exceeding forecasts. However, due to "supply constraints," the CFO forecast Q4 revenue growth of only 9%-11%, significantly below the market expectation of 12.1%. Additionally, revenue in Greater China fell short of expectations. In the earnings call, Cook reluctantly acknowledged that soaring costs of memory chips and capacity bottlenecks in advanced manufacturing processes are eroding gross margins, as the company struggles with constrained supply chains.
Bloom Energy rises 26.49%: The company was previously questioned by short-seller Hunterbrook regarding its supply chain and production capacity, particularly its reliance on scandium and uncertainty surrounding large order fulfillment. Bloom responded that the report was false and misleading, emphasizing its diversified supply chain and minimal scandium usage.
Next, pay attention to:
Complete before the August 1 deadline for the Trump administration’s AI regulatory framework: Drafts have been sent to companies including OpenAI, Google, and Anthropic. The market will monitor whether the U.S. government strengthens safety measures for large models, export controls, compute resource regulation, and government procurement rules. If regulations are stringent, valuations of AI platform companies and cloud providers may face pressure; if the framework prioritizes innovation, the AI software and infrastructure chain may continue to benefit from a risk premium.
On August 1, Microsoft Xbox price increases took effect. The impact on Microsoft’s overall financials is limited, but the market will observe whether demand can absorb the price hikes in consumer hardware, which will also reflect on the pricing power of other consumer electronics companies such as Apple, Sony, and Nintendo.
South Korea's July export data compared to year-over-year on August 1. Markets are focused on South Korea’s exports of semiconductors, memory, automobiles, and electronics. If exports continue to grow strongly, it will reinforce the narrative of a recovery in the AI hardware cycle, benefiting memory, wafer foundry, and Asian tech stocks; if the data falls below expectations, yesterday’s rebound in U.S. semiconductor stocks may be viewed as short-term short covering rather than a fundamental reversal.
August 2 OPEC+ meeting: Markets expect OPEC+ may announce a daily production increase of 188,000 barrels in September. If the increase is implemented, upward pressure on oil prices will ease, helping to moderate inflation expectations; if the increase is postponed due to escalating tensions in the Middle East, the oil risk premium could quickly return, pushing up long-term U.S. Treasury yields and inflation trades once again.