AI stocks are rising again, but only where cash flow is visible. The Fed holds steady and the market drives up the cost of capital.
Week 31 · 27–31 July 2026
Nasdaq +1.6% and S&P 500 +1.1%: Microsoft and Amazon demonstrate that capex can be rewarded when it generates growth and backlog. Meta and Apple reveal the other side of the cycle. The Fed holds rates at 3.50–3.75%, but the long end remains under pressure and oil closes July with a gain of more than 20%.
Week 31 did not rehabilitate the artificial intelligence trade indiscriminately. It imposed a stricter distinction: the market accepts massive capital expenditure only when cloud revenues, contracted capacity, backlog and cash generation make the return on capital visible. Where that proof is absent, capex reverts to being treated as a risk rather than a promise.
Wall Street closed the week higher, but the surface of the indices conceals a structure that remains incomplete. The Nasdaq gained 1.59% and the S&P 500 1.05%, while the Dow advanced approximately 1% and the Russell 2000 was essentially unchanged. On Friday, despite the S&P 500's advance, declining stocks outnumbered advancing ones by a ratio of 1.3 to 1. The rebound is therefore real, but narrow and heavily dependent on earnings selectivity.
Indices recover, but participation remains weak and leadership depends on the quality of monetisation.
The market distinguishes between capex supported by contracted demand and spending that compresses free cash flow without immediate returns.
The Fed is not raising rates, but long-term yields and the term premium keep the cost of capital elevated.
1. US Performance: positive indices, domestic market still fragile
Performance from 24 to 31 July 2026. Returns expressed in local currency.
The most important figure is not the positive sign on the indices, but the way in which it was produced. Amazon gained more than 15% on Friday, Microsoft had already posted a rise of more than 15% on Thursday, while Apple fell 7.4%. The Philadelphia Semiconductor Index remained more than 20% below its 22 June high, and on the Nasdaq new lows significantly outnumbered new highs.
The conclusion is clear: there is no broad re-acceleration of risk appetite yet. There is a recovery concentrated in stocks capable of demonstrating that infrastructure spending is generating paying demand. The flat Russell and Friday's negative breadth preclude classifying the week as a full return to a risk-on regime.
| Market | Key figure | Regime reading |
|---|---|---|
| S&P 500 | +1.05% weekly | Recovery driven by mega-caps, not confirmed by robust breadth. |
| Nasdaq | +1.59% weekly | Rebound led by Amazon and Microsoft; semiconductors still technically impaired. |
| Russell 2000 | Nearly unchanged | No convincing expansion towards small-caps and domestic beta. |
| STOXX Europe 600 | Third consecutive positive week | Europe resilient on the back of earnings, with energy leading and technology highly dispersed. |
| KOSPI | +17.9% on Friday | Record rebound following extreme liquidation; July remains close to −25%. |
2. The hyperscaler verdict: spending alone is not enough — proof is required
Microsoft provided the clearest demonstration. Azure grew 43%, ahead of expectations, and the company guided for cloud growth of 45% in constant currency for the next quarter. Free cash flow declined 23% year-over-year but came in at $19.6 billion, well above estimates. The market accepted the relative deterioration in cash generation because demand, backlog and commercial conversion are all visible.
Amazon reinforced the same message. AWS grew 37%, its fastest pace in over four years, and the group raised its 2026 capex plan to approximately $220 billion. A significant portion of future capacity is already booked: the market interpreted the spending as a response to actual demand, not speculative capacity build.
Meta presented the opposite case. Revenue grew 28%, but quarterly free cash flow collapsed 91%, from $8.55 billion to $784 million, while the lower bound of the 2026 capex guidance was raised to $130 billion. The market has stopped extending unlimited credit to the narrative: advertising still funds the project, but has yet to demonstrate that AI investment is generating a sufficient new revenue stream.
Apple highlighted another consequence of the cycle. Current results were solid, but guidance was constrained by supply limitations on advanced chips and memory. AI is therefore acting not only through the multiples of technology companies: it is absorbing industrial capacity, raising input costs and creating competition for critical components across the entire hardware supply chain.
| Company | Operational Evidence | Market Verdict |
|---|---|---|
| Microsoft | Azure +43%; FCF $19.6bn; cloud backlog $678bn. | Capex rewarded: monetisation and contracted demand. |
| Amazon | AWS +37%; 2026 capex ~$220bn; future capacity already booked. | Spending accepted as tied to visible demand. |
| Meta | Revenue +28%; FCF −91%; capex $130–145bn. | Spending penalised: economic return still insufficient. |
| Apple | Robust demand, but guidance constrained by chips and memory. | AI becomes a capacity constraint and cost pressure. |
3. The Fed Holds. The Bond Market Does Not
The FOMC kept the federal funds target at 3.50–3.75%, but the decision passed by a vote of 9 to 3. Beth Hammack, Neel Kashkari and Lorie Logan would have preferred a 25 basis point hike. It is the clearest signal yet that the debate is no longer solely about when to cut, but whether further tightening of monetary policy is necessary.
The communication had an immediate effect on the curve. The 30-year yield surpassed 5.24%, its highest level since 2007, while the 10-year closed Friday around 4.71% after touching approximately 4.75%. The 2-year, more closely anchored to expectations for the Fed path, finished at around 4.28% and ended the week marginally lower.
The issue is not solely the risk of a September hike, which was priced at around 65% by the end of the week. The problem is the loss of anchoring at the long end of the curve: when the central bank fails to convince the market on the inflation trajectory, the term premium rises and makes it more expensive to finance any investment, including that in AI infrastructure.
4. Oil: Volatility Falls, the Inflationary Problem Remains
\n Brent closed Friday at $90.12 and WTI at $84.67. The week alternated between sharp sell-offs, diplomatic overtures,\n renewed attacks and the restoration of the geopolitical risk premium. The most significant figure, however, remains the monthly one: in July, Brent gained approximately 24%\n and WTI approximately 21%.\n
\n Stabilisation below the highs does not eliminate the macro effect. US inventories at their lowest since 2018, flows still disrupted in the Strait of Hormuz\n and the Bab el-Mandeb, and elevated logistics costs keep the energy–inflation–rates transmission channel open.\n As long as Brent does not settle durably below the 85 area, the bond market cannot consider the shock resolved.\n
5. Europe and Asia: European resilience, Asian deleveraging
\n The STOXX Europe 600 closed at 649.19 points, posting its third consecutive positive week.\n Corporate earnings offset the rise in euro-area inflation and the pressure from interest rates.\n Energy was the best-performing sector on Friday, while technology and media exhibited extreme dispersion:\n European markets, too, are rewarding cash flow generation and penalising growth lacking visibility.\n
\n In Asia, the KOSPI posted a record rebound of nearly 18% on Friday, with Samsung Electronics and SK Hynix staging a strong recovery,\n but the July balance remains close to a loss of 25%. The final move does not confirm a new uptrend:\n it represents, above all, position recomposition following an extreme liquidation in the semiconductor cycle.\n
\n The Nikkei also recovered sharply in the final session, while the Bank of Japan held its rate at 1%.\n The abrupt yen strengthening on 30 July is not, however, fully explained by the monetary policy communication alone. Available evidence\n points to official yen purchases against dollars during New York trading hours, initially coordinated with South Korea and subsequently\n incorporated into a joint action between Tokyo and Washington. BoJ settlement data suggest a potential intervention of up to\n approximately $59 billion.\n
\n The institutional distinction is important: exchange rate policy is decided by the Japanese Ministry of Finance, while the Bank of Japan\n physically executes the orders as the Government's agent. The official data published on 31 July confirms zero interventions in the period\n 29 June–29 July, but does not cover the sessions of 30 and 31 July. At the time of this report's closing, the intervention can therefore be considered\n substantially confirmed, but not yet formally quantified by the Ministry; the monthly figure inclusive of these operations is expected\n on 28 August. The USD/JPY exchange rate thus becomes a systemic variable for Asian equities, JGBs, Treasuries and global carry trades.\n
6. The new map of the AI cycle
\n Week 31 delivers a more useful hierarchy than the simple distinction between technology and the rest of the market.\n The first tier consists of cloud platforms capable of immediately monetising capacity and services.\n The second comprises infrastructure providers, which remain exposed to overcapacity risk and order volatility.\n The third concerns downstream sectors, where scarcity of components, energy and capital is beginning to erode margins and guidance.\n
\n This structure explains why indices can rise while breadth remains weak. Capital is not returning to technology indiscriminately:\n it is migrating towards a handful of companies capable of demonstrating a credible relationship between capex, incremental revenues, backlog and free cash flow.\n This is an internal rotation, not a new indiscriminate expansion of beta.\n
7. Week 32 map
Earnings remain sufficient to support indices, but rates and oil are preventing a broad expansion of market breadth.
Strong labour data, oil back above 92 or weak guidance reopen the September repricing and the long-end sell-off.
Moderate macro data, energy de-escalation and solid results allow flows to extend beyond Microsoft and Amazon.
8. Factors to Monitor in Week 32
| Factor | Event or variable | Why it matters | Signal to watch |
|---|---|---|---|
| US labour market | JOLTS on Tuesday; ADP and ISM Services on Wednesday; jobless claims and productivity on Thursday; payrolls on Friday. | This is the primary test of the possibility of a Fed hike in September and of the resilience of growth. | Payrolls, unemployment and hourly earnings: a positive surprise = pressure on yields; a weak reading = growth scare risk. |
| Yen and Japanese authorities | Confirmation of the joint Tokyo–Washington action, any new yen purchases and communication from the Ministry of Finance. | A repeated intervention can force the unwinding of carry trades and transmit volatility to equities, JGBs and Treasuries. | USD/JPY: holding the 157–158 area or a return towards 164; abnormal volumes and fresh intraday spikes. |
| Treasury curve | Reaction of the 10Y and 30Y to macro data, auctions and the Fed's new reaction function. | The long end determines the equity discount rate and the sustainability of AI capex. | 10Y above 4.80% and 30Y above 5.30% would reopen pressure on multiples; below 4.60% would improve breadth. |
| Oil and geopolitics | Brent, flows through the Strait of Hormuz and Bab el-Mandeb, US inventories and Iran–US developments. | Oil remains the primary transmission channel to inflation, rates and corporate margins. | Brent above $92 = shock still accelerating; return below 84 = first genuine normalisation. |
| Earnings | AMD, Palantir, Caterpillar, Eli Lilly, Merck, Disney, McDonald's and other major issuers. | The week tests whether positive selection can extend beyond Microsoft and Amazon. | Guidance, capex, free cash flow, AI demand and the ability to pass higher costs on to customers. |
| Breadth and semiconductors | Russell 2000, S&P 500 equal-weight, SOX, advance/decline and new highs/lows. | Broader participation is needed to transform the selective rebound into a credible risk-on regime. | Equal-weight and small-cap outperformance; SOX recovery; Nasdaq new highs exceeding new lows. |
| Credit and volatility | High-yield spreads, VIX and dollar funding conditions. | A simultaneous deterioration in credit and volatility would signal that the rates repricing is becoming systemic stress. | Spread widening accompanied by a rising VIX and dollar; watch for liquidity dislocations during Asian hours. |
| Asia | Resilience of the KOSPI and Nikkei rebound, JGBs and the reaction of hardware stocks to currency moves. | Friday's recovery was driven primarily by short covering following an extreme liquidation. | Confirmation over multiple sessions, normalised volumes and reduced currency volatility; otherwise the deleveraging is not complete. |
Conclusion
Week 31 reduced the risk of an immediate liquidation, but did not restore the old regime. The market confirmed that AI remains the primary driver of earnings and simultaneously the principal source of concentration, capital requirements and volatility.
The prevailing regime is one of selective risk-on under restrictive financial conditions. Microsoft and Amazon have demonstrated that capital expenditure can be rewarded; Meta and Apple have shown that narrative alone is insufficient. As long as market breadth remains fragile, the SOX stays well below its highs, and the long end of the curve continues to rise, the current rebound should be read as a quality-driven rotation rather than a broad-based green light for risk appetite.
Sources and References
- It looks like you've provided a headline rather than a body of text to translate. The headline you've shared is already in English. Please provide the Italian text you'd like me to translate, and I'll be happy to assist.Weekly performance of the major U.S. indices.
- Reuters, "Wall Street chiude in rialzo: Amazon attenua i timori sull'IA": US close, breadth, semiconductors, Amazon, Apple, Microsoft, and rate probabilities.
- **Federal Reserve, FOMC Statement – July 29, 2026**: target rate, macroeconomic assessment and a 9–3 vote.
- Reuters, "Microsoft says cash will keep flowing from AI"Azure growth, capex, free cash flow, and cloud backlog.
- Reuters, "Meta cash flow craters as Zuckerberg doubles down on AI spending"Free cash flow, revenues and capex guidance.
- Reuters, "Amazon vola in Borsa: il boom dei ricavi cloud dissipa i timori sulle scommesse miliardarie sull'IA": AWS, capex and reserved capacity.
- Reuters, "Apple delude le aspettative con previsioni offuscate dalle difficoltà della catena di approvvigionamento": results, guidance, and restrictions on chips and memory.
- Reuters, "Global Markets," July 31, 2026: Treasuries, dollar, yen, KOSPI and cross-asset overview.
- Reuters, "I prezzi del petrolio chiudono in rialzo di oltre l'1%, registrando il mese più forte da marzo": Brent, WTI, flows and inventories.
- Reuters, "European stocks notch monthly gain on earnings optimism"STOXX 600, Sectors, and Eurozone Inflation.
- Reuters, "Morning Bid: Yen sinks as BOJ holds — and it's the KOSPI's best day": Asian markets, Bank of Japan and currencies.
- Reuters, "Wall St Week Ahead": Jobs data, earnings season agenda, and risks of Week 32.
- Reuters, "Japan to announce Tokyo, Washington took joint action on yen": yen intervention, international coordination and indications derived from BoJ settlement data.
- Japanese Ministry of Finance, Foreign Exchange Operations 29 June – 29 July 2026: zero interventions in the officially reported period, which does not include 30 and 31 July.
- Bank of Japan, "Outline of Foreign Exchange Intervention Operations": attribution of decisions to the Ministry of Finance and the executive role of the Bank of Japan.
- U.S. Bureau of Labor Statistics, August 2026 Calendar## JOLTS, Productivity and the Employment Situation Report: Week 32
- Institute for Supply Management, 2026 PMI CalendarManufacturing PMI on August 3rd and Services PMI on August 5th.
It seems like your message got cut off — you only sent "Autore:" (Author:) without any text to translate. Could you please share the full Italian text you'd like me to translate?Fabrizio Ravetto.
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