Tesla posts its largest weekly decline since 2022 as MAG7 and storage giants release earnings

Article by: Tide Research

Last Friday, the three major indices diverged: the S&P 500 barely closed higher, the Dow Jones halted its two-day decline, while the Nasdaq hit its lowest level in nearly three months, finishing the week down 2.13%. Selling pressure from South Korea’s tightened leverage ETF trading rules spilled over into U.S. semiconductor stocks. The earnings season became a major battleground, with Tesla and Google posting some of their rarest weekly losses on record. Over the weekend, the U.S. and Iran paused mutual strikes, but in the Red Sea, Houthi militants targeted Saudi ports. This week brings a super week, with the Federal Reserve, Bank of Japan, and Bank of England announcing interest rate decisions in succession, while Microsoft, Meta, Apple, Amazon join SK Hynix, Samsung Electronics, and Kioxia in releasing earnings reports.

The S&P 500 rose 0.05% to 7,411.98, ending the week down 0.61%. The Dow Jones Industrial Average gained 0.46% to 51,947.25, closing the week down 0.38% after three consecutive weekly declines. The Nasdaq Composite fell 0.64% to 24,975.824, ending the week down 2.13% and closing at its lowest level in nearly three months.

Chip stocks were hit hard last Friday, with the index closing down over 4%. SanDisk fell more than 10%, and Intel’s stock dropped nearly 8% despite solid earnings.

This week’s earnings report results were mixed: Tesla plunged nearly 18% for the week, marking its largest weekly decline since 2022, while Google fell nearly 8%. Apple showed a strong rebound, rising 3.5% in a single day, helping to lift Microsoft and Google as well. Among the Big Tech seven, only NVIDIA ended the week in positive territory.

WTI crude oil settled down 3.12% at $89.31 per barrel, but still rose 9.21% for the week. Brent crude oil settled down 3.88% at $96.78 per barrel, with a weekly gain of 9.85%. COMEX gold rose 0.52% to $4,067.6 per ounce, up 1.37% for the week. COMEX silver rose 1.48% to $58.656 per ounce, up 4.67% for the week. Bitcoin opened Friday at $65,047.87, down 1.6% from Thursday, and fell below $64,000 during the week. Ethereum opened at $1,876.92, down 2.9%.

The 10-year U.S. Treasury yield stood at 4.68%, rising approximately 13 basis points for the week. The 2-year U.S. Treasury yield stood at 4.33%, rising approximately 15 basis points for the week.

Over the weekend, there was a rare easing of geopolitical tensions. Pakistan mediated, conveying to Iran that halting attacks on Gulf nations is a prerequisite for restarting negotiations. Trump also softened his stance, stating he prefers to sit down and talk, and believes Iran has shown more genuine intent in this round than at any time in recent memory.

On Saturday, Trump ordered a pause in airstrikes against Iran to create space for diplomacy, and on Sunday, Iran’s military confirmed that both sides had ceased mutual strikes for two consecutive nights. However, the White House emphasized that all military options remain on the table, and this pause is more of a tactical breathing room than a full de-escalation.

A new risk has emerged in the Red Sea region. On Saturday, the Houthi militants in Yemen launched two attacks on Saudi oil facilities at Red Sea ports, prompting a retaliatory airstrike by the Saudi-led multinational coalition—the first publicly acknowledged airstrike since the ceasefire agreement four years ago. What is truly concerning is Yanbu: after the Strait of Hormuz was blocked, Yanbu has become the only remaining route for Saudi crude oil exports. If this route is compromised, the global energy market will have virtually no fallback options.

At the opening of Asian trading on Monday, international crude oil futures plunged sharply as news emerged that the U.S. and Iran had paused their mutual attacks; Brent crude fell over 7% at one point, dropping below $90.

Not all voices are concerned that geopolitical risks will continue to suppress the stock market. Yardeni Research and Fundstrat revisited earlier this year, when the S&P 500 dropped around 10% during the first round of U.S.-Iran military tensions, only to recover shortly afterward. Historically, such geopolitical shocks have more often provided opportunities to buy at lower levels—and the current pessimism may be overblown.

The AI capital expenditure boom among tech giants is now showing signs of divergence. Morgan Stanley has warned that the current surge in AI storage is nearing its peak, with memory contract prices likely to reach their highest point in the fourth quarter. The proportion of institutions that had previously raised their profit forecasts for storage manufacturers peaked at 92%, but has now declined to 77%. Valuations for SK Hynix and Samsung have also adjusted downward accordingly.

Michael Burry, the famous "Big Short," stoked the flames again last weekend by publicly increasing his short positions in NVIDIA and Micron. He argued that much of the seemingly strong order demand on these companies' balance sheets is ultimately sustained by off-balance-sheet financing arrangements, meaning the actual volume of genuine end-customer purchases is far lower than it appears.

Whether these divergent signals can be resolved largely depends on this week’s schedule. This is one of the rare super weeks for global markets, with the Federal Reserve set to announce its interest rate decision early Wednesday. The market generally expects rates to remain unchanged, and the subsequent press conference by Chair Powell will be the focal point, as investors seek clues on whether rate hikes will resume in September. The Bank of Japan and the Bank of England will also announce their decisions on Friday and Wednesday, respectively, with both expected to hold rates steady.

The U.S. June PCE price index, the Federal Reserve's preferred inflation gauge, will be released on Wednesday, with oil prices rebounding above $100 posing an upside risk to the data.

The earnings season enters its most intense week. On Wednesday, Microsoft, Meta, and SK Hynix report first, followed by Apple, Amazon, and Samsung Electronics on Thursday, with Kioxia closing out on Friday. The growth rates of cloud businesses and AI monetization capabilities of these four tech giants, combined with the three storage chip leaders’ comments on HBM shipments and pricing for general-purpose storage, will collectively determine the next direction of this AI capital expenditure narrative.

Last Friday’s market divergence foreshadowed this week’s central issue: index movements no longer fully reflect capital’s true sentiment; the real direction hinges on whether several specific signals materialize. The record single-week declines in Tesla and Google indicate that market patience with AI investments and returns has nearly run out. This week’s密集 earnings season will directly test whether that patience has truly hit its bottom.

Beyond the earnings report as the main thread, the situation in the Middle East is another critical variable. The game in the Middle East is far from over, and any tactical adjustment by either side could be overturned within days by new points of conflict. While historical precedent suggests an optimistic outlook has some merit, this round is more complex and involves significantly larger sums of capital than previous conflicts. Applying the simplistic rule of "geopolitical risk as a buying opportunity" requires greater caution.

Beyond earnings reports and geopolitics, the memory chip sector is also facing internal turmoil—this constitutes another key undercurrent worth watching this week. If the earnings and guidance from the three major memory chip giants remain strong, these warnings may prove overly pessimistic; but if the reports show even a hint of weakness, combined with potentially hawkish signals from Fed’s Walsh, the market could face a more dramatic repricing.