U.S. chip stocks rise then pull back amid geopolitical tensions

Article by: Tide Research

Later that afternoon, U.S. forces launched a new strike against Iran, aimed at weakening Iran’s ability to threaten commercial shipping in the Strait of Hormuz. Meanwhile, Trump posted on social media that Iran would pay many times over for every fallen American soldier. The three major U.S. stock indices opened higher but closed lower; the Dow Jones fell 0.59%, marking its lowest close since June 24 and the third consecutive day of declines. Chip stocks rose nearly 3% during trading but saw their gains significantly narrow by the close. Chinese stocks were among the few bright spots of the day, with the Livemore Leading Index rising 1.34% and Alibaba up 4.67%.

The Dow Jones fell 0.59% to 51,839.26, marking its lowest closing level since June 24. The S&P 500 declined 0.19% to 7,443.28. The Nasdaq dropped 0.05% to 25,508.07.

Tech giants showed mixed movements: Microsoft rose 2.15%, Broadcom rose 1.98%, Google rose 1.52%, Amazon rose 1.12%, NVIDIA rose 0.23%, Meta fell 0.02%, Apple fell 2.14%, Tesla fell 2.96%, and SpaceX fell 3.34%.

The Philadelphia Semiconductor Index closed up 0.6%, the iShares Semiconductor ETF rose 0.45%, and the VanEck Semiconductor ETF gained 0.41%; both ETFs initially surged nearly 3% during the session before sharply retracing. Photonic communication stocks performed strongly, with Credo up 4.63%, Marvell Technology up 3.32%, and Coherent up 2.81%.

Most memory stocks rose, with SanDisk up 2.67%, Western Digital up 2.14%, Micron up 1.94%, Seagate up 1.88%, and SK Hynix down 1.86%.

Cryptocurrency-related stock IREN surged 19.57%, posting its largest single-day gain since November 2024, after raising its recurring revenue target for 2026 to over $4 billion and securing a new $2.8 billion client contract. Warner Bros. Discovery fell 3.76%, closing at its lowest level since April 2025, after a judge halted Paramount Global’s acquisition attempt for two weeks.

Chinese stocks rallied collectively, with the Livemore China Dragon Index rising 1.34% and the Nasdaq China Dragon Index climbing 0.9%. Kingsoft Cloud gained 5.24%, Alibaba rose 4.67%, Futu Holdings increased 3.34%, JD.com advanced 3.31%, XPeng declined 2.51%, and NIO fell 1.43%.

WTI crude oil settled up 0.9%, while Brent crude oil settled up 1.27%. COMEX gold fell 0.15%, and COMEX silver rose 0.66%. Bitcoin is trading at $64,585.85, up 0.20% over 24 hours; Ethereum is trading at $1,901.08, up 1.80% over 24 hours.

U.S. military strikes against Iran continue to escalate, with Central Command confirming that this round of airstrikes aims to degrade Iran’s ability to disrupt commercial shipping through the Strait of Hormuz. Iran’s stance has shown slight nuance, as an official spokesperson acknowledged at a press conference that a third party had indeed conveyed proposals for mediation—though he declined to provide details. Nevertheless, during the same briefing, he directed criticism at U.S. forces, accusing them of targeting civilian infrastructure such as hospitals and bridges.

This posture of fighting while keeping a door open continues the pattern of the past several days, as the market remains uncertain whether the situation can truly de-escalate.

The day's performance of chip stocks was interpreted by many as a technical rebound, not yet a trend reversal. Analysts have cautioned that the chip and AI industries are undergoing a genuine stress test; recent technical weakness suggests the likelihood of prices testing lower support levels is increasing. A brief rebound after oversold conditions is not surprising, but what is truly concerning is that the previous sustained upward momentum may have already ended.

Another interpretation comes from a strategy head at KBC Securities, who attributes the cause to seasonal factors—market sentiment is typically weaker in July, making it difficult to see significant capital inflows even as chip stocks plunge sharply. Data from Goldman Sachs’ prime brokerage division offers an even colder signal: over the past two months, hedge funds have exited U.S. technology stocks at the fastest pace on record.

The market’s next key question is Alphabet’s earnings report on Wednesday; as one of the major drivers behind the S&P 500’s rally this year, its capital expenditure guidance will directly test whether hyperscale cloud providers are still willing to maintain their current pace of investment in AI infrastructure.

The trajectory of oil prices is once again disrupting the previously easing inflation narrative. Previously, Federal Reserve Chair Powell stated at a conference in Portugal that the risks of recent price increases had diminished. However, with the ceasefire arrangements in the Middle East effectively collapsing and oil prices rising steadily, the interest rate market has begun repricing the likelihood of further rate hikes. Institutional analyses suggest that there could still be approximately two more rate hikes cumulatively by the first quarter of 2027.

Analysts have drawn an analogy: once oil prices rise above the $90 mark, each additional dollar increase adds another tightening constraint on the Federal Reserve, which had just begun to breathe easier. The hard-won cooling of inflation and declining expectations for rate hikes could easily be undone by a surge in oil prices. Asian markets are similarly affected, as financial conditions in energy-importing economies are being tightened by rising bond yields and elevated inflation expectations.

The Dow Jones hit its lowest level in nearly a month, but this appears more like a continuation of geopolitical noise rather than a new crack in fundamentals; the market still believes Trump will not truly push the situation out of control, which underpins the near 3% intraday rebound in chip stocks.

What truly warrants caution is that professional capital has become more cautious than retail investors. If this withdrawal pace doesn’t slow down before Alphabet’s earnings report, the market may continue to price in a “buy the rumor, sell the news” scenario—even if the actual earnings numbers are solid.

In recent weeks, the earnings reports from TSMC and Samsung have already set a precedent.

The counter-trend rise of Chinese-listed stocks provides a window into how capital is exiting U.S. tech stocks, which are under dual pressure from geopolitical and technical factors, and shifting toward an alternative option that has not yet been fully priced in by these two factors.

How long this divergence lasts depends on whether the Middle East situation truly de-escalates and whether oil prices push the Fed back toward a more hawkish stance. This week, Alphabet’s earnings report and the direction of oil prices will be the first two indicators to provide clarity.