Falcon’s View – Week ending 31 July 2026

S&P 500: +1.05%

NASDAQ 100: +0.52%

STOXX Europe 600: +0.73%

EURO STOXX 50: +1.23%

My portfolio: -1.37%

Market pulse

The dominant equity-market driver was another change in how investors interpreted the AI capital-expenditure cycle. The previous reporting period had ended with investors punishing hyperscalers for negative free cash flow and rapidly rising infrastructure expenditure. This week, Microsoft and Amazon demonstrated that the market will tolerate enormous spending when it is accompanied by visible cloud growth, margins and contracted demand. Microsoft rose more than 15% on Thursday after strong Azure growth and a forecast implying continued cash generation, while Amazon jumped 15.3% on Friday after AWS revenue increased 37%—its fastest growth in more than four years. The two reports transformed the late-week narrative from indiscriminate fear of AI expenditure into a more selective test of whether each company can prove near-term monetisation.

That distinction produced extreme divergence inside Big Tech. Amazon and Microsoft were rewarded; Meta remained under pressure after reporting a 91% decline in free cash flow, and Apple fell 7.4% on Friday after issuing a weak outlook linked to supply constraints and concern about demand at higher prices. The market was not embracing every company spending heavily on AI. It was rewarding the companies that could connect that spending to accelerating revenue and operating performance.

The rally also had to overcome a significant monetary-policy shock. The Federal Reserve kept the federal-funds target at 3.50%–3.75% on Wednesday, but the decision passed by a divided 9–3 vote, with three policymakers preferring an immediate increase. The lack of clear forward guidance from Chair Kevin Warsh increased uncertainty over September and helped push long-dated Treasury yields to multi-year highs. The S&P 500 fell 1.52% on Wednesday and the NASDAQ 100 2.06%. Strong Microsoft and Amazon results subsequently outweighed that pressure at index level, but higher discount rates remained an important restraint on expensive growth shares.

Semiconductors experienced the most violent version of this conflict. Before the Microsoft report, investors sold the sector on concerns about stretched valuations, the financing of AI infrastructure and stronger Chinese competition. Samsung Electronics fell 13.4% and SK Hynix 14.7% on Tuesday, while China’s CXMT surged 466% on its Shanghai debut and reports of domestic Chinese deep-ultraviolet lithography equipment raised fears of faster capacity expansion. Micron, AMD, KLA, ASML and other chip-related holdings were pulled into the same de-risking wave. Microsoft’s results then drove the Philadelphia Semiconductor Index up 8.2% on Thursday, but the rebound was insufficient to erase the earlier damage for many individual holdings.

European equities were more broadly supported by corporate earnings. Estimated second-quarter STOXX 600 profit growth rose to 20.8% year-on-year; even excluding the energy sector, the estimate was 10.3%. Strong results across consumer, financial, industrial and energy companies helped the STOXX Europe 600 reach an intraday record on Friday, although it closed slightly lower that day. The EURO STOXX 50 outperformed both the broader European index and the NASDAQ 100 over the full period. The two Swedish indices performed best of the six benchmarks, with both gaining approximately 1.5%.

Oil remained an important but unstable macroeconomic variable. Brent crude fell sharply early in the week as hopes of U.S.–Iran de-escalation reduced the immediate supply premium, but renewed tension later pushed it briefly above $90 a barrel. Lower oil supported travel, consumer and rate-sensitive shares; higher oil benefited energy producers but revived inflation and interest-rate fears. The week’s swings in crude and Treasury yields repeatedly changed the relative performance of technology, energy, airlines and consumer stocks.

The market’s message therefore evolved beyond the simple division between companies receiving AI capital expenditure and companies funding it. Amazon and Microsoft showed that the funders can outperform when monetisation is immediate and measurable. KLA, Micron and AMD showed that suppliers can fall even while current demand remains strong when valuations imply perfect execution and investors become more concerned about competition, financing and future oversupply. The new dividing line is evidence versus expectation.

Crowd vs. price

Investor attention remained concentrated in AI, but the week exposed a more demanding hierarchy inside the trade. Amazon and Alphabet gained because investors became more confident that cloud and AI infrastructure could produce rapid revenue growth. Micron and AMD fell because the hardware side of the trade was forced to absorb concerns about Chinese competition, customer financing and valuations that already assumed years of exceptional growth.

The same AI investment cycle therefore generated both the portfolio’s three largest gains and its three largest losses. The crowd did not abandon AI. It moved toward companies offering visible near-term monetisation and away from companies whose prices required future demand, margins and competitive positions to remain almost flawless.

Holdings & Watchlist Notes

Amazon (AMZN)

+17.00%

Almost the entire weekly gain occurred on Friday after Amazon reported its strongest AWS growth in more than four years. AWS revenue increased 37% to $42.2 billion, while the contract backlog reached $496 billion. Amazon simultaneously increased its expected 2026 capital expenditure by 10% to $220 billion. Under ordinary circumstances, that spending increase could have damaged the shares; instead, management said that most available AWS capacity for 2027 and some capacity for 2028 had already been reserved by customers. Investors therefore treated the expenditure as construction against identifiable demand rather than a speculative build-out.

The principal caveat is that trailing twelve-month free cash flow deteriorated from positive $18.2 billion to negative $7.6 billion. The rally was not evidence that the cost problem had disappeared. It reflected a judgment that the AWS acceleration and reservation data were strong enough to justify the cash burn. At least 15 brokerages raised their price targets after the report. The clean read is that Amazon gained because it supplied the clearest evidence of the week that enormous AI expenditure can already generate measurable revenue, margins and contracted demand.