Falcon’s View – Week ending 7 August 2026

S&P 500: +3.58%

NASDAQ 100: +5.12%

STOXX Europe 600: +1.70%

EURO STOXX 50: +2.61%

My portfolio: + 3.27%

Market pulse

The dominant equity-market driver was the simultaneous removal of two risks that had constrained valuations during July: the geopolitical premium in oil prices and the expectation of further Federal Reserve tightening. Hopes that negotiations could lead to a reopening of the Strait of Hormuz pushed crude oil and long-term Treasury yields sharply lower, while strong corporate earnings—particularly among semiconductor, AI-infrastructure and technology companies—provided a fundamental reason for investors to re-enter risk assets. The result was a broad rally, but one led decisively by the NASDAQ 100, which gained 5.12% and substantially outperformed all five other benchmarks.

Monday and Tuesday produced most of the week’s advance. On Monday, crude oil fell approximately 5% as the market anticipated negotiations over the Strait of Hormuz. Lower oil reduced near-term inflation expectations and pulled Treasury yields lower, helping the S&P 500 rise 1.48% and the NASDAQ Composite 2.13%. On Tuesday, another decline of roughly 5% in crude was accompanied by further optimism regarding a possible agreement, sending the S&P 500 up 1.79% and the NASDAQ Composite up 2.59%. Together, those two sessions accounted for approximately 92% of the S&P 500’s full-week gain. The underlying mechanism was straightforward: cheaper energy reduced pressure on consumers and corporate margins, while simultaneously lowering the probability that the Federal Reserve would need to raise interest rates again.

The rally was reinforced by unusually strong corporate results and renewed confidence that AI capital expenditure was creating revenue beyond the largest hyperscalers. Palantir rose 29.5% after raising its annual revenue forecast, while Caterpillar gained 5.6% as AI data-centre construction increased demand for its power-generation and construction equipment. Semiconductor shares rose particularly sharply, with the Philadelphia Semiconductor Index gaining 6.6% on Tuesday. By Friday, 85.1% of the 436 S&P 500 companies that had reported results had exceeded earnings expectations. The market therefore moved from questioning the entire AI investment cycle to rewarding companies able to demonstrate that the build-out was producing identifiable demand for chips, memory, networking, power and physical infrastructure.

Friday’s US employment report produced the final leg of the rally. Nonfarm payrolls unexpectedly fell by 23,000 in July, compared with expectations for an increase of 80,000, while the previous two months were revised sharply lower. The unemployment rate nevertheless declined to 4.1%, largely because workers left the labour force. Markets interpreted the report primarily through the interest-rate channel: the implied probability of a September Federal Reserve increase fell to approximately 44%, from 55% the previous day and 67% one week earlier. The S&P 500 consequently gained another 0.62% and the NASDAQ Composite 1.30%. This was a conventional “bad news is good news” reaction, although the deterioration in employment also created a risk that future weak data could eventually be interpreted as evidence of economic contraction rather than monetary relief.

European equities participated in the rally but were less exposed to the high-beta technology rebound. The STOXX Europe 600 recorded four consecutive record closes and finished the week at 660.25, supported by lower oil prices, improving US rate expectations and a broadly positive European reporting season. Technology was the index’s best-performing sector, while estimated second-quarter European profit growth rose above 22%, its strongest pace since 2022. The EURO STOXX 50 outperformed the broader STOXX Europe 600, while both Swedish indices gained approximately 2%. Europe benefited particularly from the decline in crude because its economies are generally more dependent on imported energy than the United States.

The advance was not indiscriminate. Several technology companies fell despite publishing objectively strong results because their guidance failed to meet expectations already embedded in their valuations. Datadog was the clearest example: the company reported 36% revenue growth, but investors focused on reduced usage by a major AI customer and a full-year forecast below the prevailing analyst consensus. AMD and several software companies also came under pressure during the middle of the week. The market was therefore not abandoning valuation discipline altogether; it was rewarding companies whose exposure to AI demand appeared immediate and independently verifiable, while punishing those dependent on flawless future execution or a small number of unusually large customers.

The clean reading of the week is therefore that it was a lower-oil, lower-yield rally, validated by earnings and extended by weak employment data. The market’s strongest preference was for semiconductor, memory, optical-connectivity and data-centre infrastructure companies. The principal question was no longer whether AI expenditure was excessive in the aggregate, but which companies controlled the physical bottlenecks through which that expenditure had to pass.

Crowd vs. price

Investor positioning moved rapidly back toward high-beta AI and semiconductor shares. Credo, Marvell, Intel, NVIDIA, ASML, Micron and Applied Materials all substantially outperformed the broader market. After the previous month’s semiconductor correction, stronger earnings and falling yields gave underexposed investors a reason to rebuild positions. The speed and concentration of the rebound suggest that short-covering and position rebuilding amplified the fundamental catalysts, although the precise contribution of those flows cannot be measured from public price data alone.

The week nevertheless exposed a more demanding hierarchy within the AI trade. Credo and Marvell were rewarded for exposure to memory, optical and high-speed connectivity bottlenecks. Intel benefited from improving operational results and renewed interest in higher-beta semiconductor turnaround stories. Datadog, by contrast, was punished even though current revenue growth remained strong because its forward outlook exposed dependence on the usage decisions of one major AI customer. The dividing line was not AI versus non-AI. It was visible demand and strategic scarcity versus valuation dependent on future expectations remaining almost perfect.

The two utility holdings demonstrated that company-specific events could still override the positive macroeconomic environment. NextEra Energy and Dominion Energy both declined after Virginia’s governor intervened in the regulatory review of their proposed merger. Their weakness was therefore not evidence of a general collapse in defensive equities; it principally reflected a reassessment of the transaction’s timing, conditions and implied value.

Holdings & Watchlist Notes

Credo Technology (CRDO)

+20.73%

Credo Technology gained 20.73%, although the increase cannot be attributed to a single earnings report or financial disclosure. The most defensible explanation is a combination of product news, favourable policy read-through and the broad semiconductor rally. During FMS 2026, Credo presented new connectivity products designed to move data more efficiently between processors, memory and storage, including its OmniConnect Weaver memory interconnect and a PCIe 6.0 retimer for next-generation AI infrastructure. The company therefore benefited from growing recognition that data movement and memory access—not merely processor availability—are becoming major constraints on AI-system performance. Sentiment was reinforced by reports that the US government was preparing restrictions on imports of new Chinese optical transceivers used in data centres. Credo supplies high-speed electrical and optical-connectivity technology and could benefit if US customers are pushed toward non-Chinese suppliers, although that policy connection remains an investor inference rather than company guidance. The clean reading is that Credo was revalued as a potential beneficiary of both AI-connectivity demand and the possible exclusion of Chinese competitors, with the sector-wide semiconductor rebound magnifying the movement.