The AI Trade's Biggest Test 👀

Welcome back to the Day Trading newsletter 📈

A Chinese AI model shoved chip stocks into a bear market, Netflix slid to a 52-week low, and oil jumped more than 14% as the Iran conflict widened.

Now comes the main event: the busiest earnings week of the summer, and it lands squarely on the AI trade.

Let’s get into it 👇️ 

📆 Monday 7/20 — PayPal board meeting: The board is expected to meet as soon as Monday on Stripe and Advent's $60.50-per-share offer, which it reportedly views as inadequate. Watch for a formal rejection or an invitation to raise the bid.

📆 Wednesday 7/22 — Alphabet + Tesla earnings (after close): The AI trade's biggest single test — Alphabet's capex guidance is the number the whole market is waiting on. IBM's full results also land after last week's brutal preannouncement.

📆 Thursday 7/23 — ECB rate decision (8:15am ET): The European Central Bank is expected to hold after last month's quarter-point hike. The signal to watch is guidance on further hikes — markets are pricing at least one more this year.

📆 Thursday 7/23 — Intel earnings (after close): The first broad read on second-half chip demand with the sector in a bear market. Updates on Intel's data-center AI roadmap could steady the group — or extend the rout.

📆 Friday 7/24 — Flash PMIs (9:45am ET) + American Express earnings (before open): July's first snapshot of business activity under the oil shock, plus a clean read on whether the consumer is still spending.

🤖 The Philadelphia Semiconductor Index fell into a bear market Friday, closing 20.2% below its late-June record after Chinese startup Moonshot released its Kimi K3 model. The open-weight model matches or beats several leading US systems, reviving DeepSeek-style fears that cheaper AI means less chip spending. The Nasdaq dropped 1.4%.

🔽 Netflix sank 7.3% Friday to $68.95 (a 52-week low) after a lukewarm Q2 report. Earnings beat by a penny, but revenue came in slightly light and Q3 revenue guidance of $12.86 billion missed the roughly $13 billion consensus. A plan to report engagement data only once a year didn't help.

🛢️ Oil surged again Friday after Kuwait said an Iranian attack damaged a power and water desalination plant. Brent jumped 4.6% to settle at $88.10 and WTI rose 4.5% to $82.49 (both up more than 14% for the week) as Iran struck US targets across the Gulf and fears of a wider regional war grew.

🍏 Apple briefly overtook Nvidia as the world's most valuable company Friday. Nvidia shares slid as much as 3.9% amid doubts about AI infrastructure spending before paring losses to reclaim the top spot by the close. Both companies now sit near $4.9 trillion, and the flip shows how fast money is rotating out of the AI trade.

💵 PayPal's board views Stripe and Advent's $60.50-per-share takeover offer as inadequate, Reuters reported Friday. Directors believe the $53 billion bid undervalues the company and carries financing and regulatory risk. The board meets as soon as Monday. Watch for a formal rejection or a push for a sweetened offer.

✈️ The FAA will let Boeing sign off on the airworthiness of its own 737 Max and 787 jets again, effective Monday. The authority was stripped after the fatal Max crashes and 787 production-quality problems. It's a major milestone in Boeing's rehabilitation, though the FAA says its inspections and audits continue.

📊 Polymarket traders cut the odds of the CLARITY Act passing this year to a record-low 32% as Senate negotiations stall. The sticking point is a bipartisan ethics provision barring senior officials (including the president) from personal crypto ventures. Bitcoin traded near $64,000, and the Senate has only a few working weeks left before August recess.

💰️ The AI selloff is crushing retail traders crowded into leveraged ETFs, Bloomberg reported. Assets in leveraged funds have contracted from a record $218 billion to around $198 billion, and South Korea's $3.4 billion SK Hynix leveraged fund (part of a group that's roughly 92% retail-held) has plunged more than 60% from its June peak.

Q2 earnings season hits its crescendo this week, with more than 80 S&P 500 companies reporting, headlined by Alphabet and Tesla on Wednesday and Intel on Thursday.

S&P 500 earnings are projected up roughly 26% for the quarter.

The timing could hardly be more dramatic: chip stocks just closed their worst week in over a year, with the Philadelphia Semiconductor Index falling into a bear market Friday (ending 20.2% below its late-June record) after Chinese startup Moonshot released a powerful open-weight model that rivals leading US systems.

This week is a referendum on AI spending. 

The selloff is built on one fear: that cheaper AI models mean hyperscalers will slow the data-center buildout that has powered the entire chip complex.

Alphabet's report is the first real answer. The company has already guided 2026 capital spending to $180–190 billion and told investors 2027 will rise significantly.

Any sign of trimming that number would validate the pullback thesis. Google Cloud growth and its massive order backlog matter too.

Intel, a day later, gives the first broad read on second-half chip demand, plus updates on its AI data-center roadmap.

Tesla rounds out the trio with its robotaxi and AI story (the main thing holding up its valuation).

What to watch: 

• Alphabet and Tesla report after Wednesday's close. Intel after Thursday's.

• If Alphabet raises capex and chip stocks still can't rally, that tells you sentiment (not spending) is the problem.

• It all feeds into the Fed's July 28–29 meeting: futures overwhelmingly price a hold, but with oil near $88 a September hike is still live, so strong earnings plus a hot tape could keep rate pressure on.

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⚠️ Disclaimer: Not financial advice. Do your research before making any trades.