On July 26, 2026, the US stock market closed strong. The Nasdaq Composite Index rose 8% in July, not only recovering losses since Q2 but also hitting a new record high close. The S&P 500 rose 5.2% in tandem, while the Dow Jones Industrial Average gained a more modest 3.1%. The main driver came from AI-related sectors, with NVIDIA, AMD, and several AI software companies hitting new highs.

AI Surge Resumes: Full-Scale Expansion from Hardware to Applications

In July, several tech giants released better-than-expected quarterly earnings. NVIDIA's data center revenue grew 120% year-over-year, and AMD's AI chip shipments also surged. Meanwhile, AI application companies like C3.ai and Palantir saw target price upgrades from institutions. Industry analysts noted that the AI trend has expanded from hardware infrastructure to software and services, with market expectations for AI commercialization significantly heating up.

Notably, in mid-July, Microsoft announced that its Azure AI services had surpassed 100,000 enterprise customers, boosting the cloud services sector overall. Amazon AWS and Google Cloud also launched new AI tools simultaneously. A Citigroup strategy report stated, "AI has become the core narrative of the US stock market, with valuation premiums having fundamental support."

Macro Environment: Fed Stability and Soft Landing Expectations

The Fed kept the federal funds rate unchanged at 4.5%-4.75% at its July meeting, with Chairman Powell reiterating a "data-dependent" stance. The market generally believes the current rate hike cycle has ended, with a potential rate cut as early as early 2027. The stable rate environment lowers capital costs, benefiting growth tech stocks.

On the economic data front, US Q2 GDP grew at an annualized rate of 2.1% in the initial estimate, lower than Q1's 2.8%, but consumer spending remained resilient. The unemployment rate stayed at a low 3.7%, and wage growth slowed moderately. These data supported "soft landing" expectations and alleviated recession fears. The Bank of America Merrill Lynch survey showed global fund managers' allocation to tech stocks reached a five-year high.

Capital Flows: Retail and Institutional Forces Jointly Boost

In July, net capital inflows into US stocks were significant. According to EPFR, tech stock funds attracted over $20 billion in net subscriptions in the week ending July 24. Robinhood reported a 15% month-over-month increase in monthly active users, with AI-themed ETFs being the most popular. Hedge funds also increased positions in semiconductor leaders; Goldman Sachs statistics showed NVIDIA topped the list of increased holdings in star fund managers' 13F filings.

However, rapid capital inflows also raise concerns. Some AI stocks have P/E ratios exceeding 100, sparking debate over whether the market is in a bubble. Short seller Citron Research released a report in late July warning of "excessive hype" in the AI sector, but was quickly countered by bulls.

Risk Warning: Geopolitics and Earnings Verification Period

Despite optimistic market sentiment, uncertainties remain. First, the US-China tech rivalry in semiconductors intensified; on July 25, the US Department of Commerce announced further restrictions on AI chip exports to China, potentially impacting overseas revenue for some companies. Second, August marks the tail end of earnings season; if company guidance falls short, high-valuation stocks face correction risks. Third, the approaching US election may introduce policy uncertainty that could disturb markets.

Morgan Stanley strategist Mike Wilson noted: "The current AI rally has fundamental support, but the gains have already priced in over a year of future earnings. Investors should focus on cash-flow-stable leading companies and avoid chasing concept stocks lacking profit prospects."

Outlook: Monitor First Trading Day in August and VIX Changes

Looking ahead to next week, the market will focus on the ISM Manufacturing Index on the first trading day of August (August 3) and earnings calls from heavyweights like Apple and Amazon. Meanwhile, the VIX fear index is currently at a low 12, and if a sudden negative event occurs, volatility could spike sharply. Analysts at Nanyang Stock News suggest investors could appropriately allocate a core position in tech leaders and use options to hedge short-term correction risks.

Overall, US stocks hit new highs in July driven by AI, but the future trend still depends on earnings and policy developments. For long-term investors, selecting the right tracks and maintaining a balanced portfolio remains a prudent strategy.