Nasdaq plunges 3.2% in July as AI stocks lose momentum amid profitability concerns

The Nasdaq index suffered its worst monthly performance since March 2025, declining by 3.2% in July. This downturn occurred despite a rebound in the final week of the month, signaling a shift in market sentiment. The technology-heavy index was particularly impacted by a significant drop in semiconductor and memory chip producers.

For the first half of the year, the technology sector, especially companies involved in artificial intelligence (AI), had been a major driver of market growth. The Nasdaq had reached a peak above 27,000 points on June 2. However, by July 29, it had fallen 10% from this high, entering correction territory. This correction was exacerbated by a more than 20% drop in semiconductor stocks during July, a decline not seen since October 2008.

Investors began to question the sustainability of the substantial investments being made in AI. Concerns grew regarding the long-term profitability of these ventures and the increasing competition from Chinese tech firms, such as Moonshot. This led to a move away from the "momentum" strategy, where investors had previously bought assets that were already rising, and a reluctance to invest in assets that were declining.

The broader S&P 500 index also saw a decline in July, losing 0.1%. The sharp fall in tech stocks, particularly those in the semiconductor industry, highlights the volatility and speculative nature of investments tied to emerging technologies like AI.