Market Wrap For Week Ending 2 August 2026

MARKETS IN BRIEF

Markets were cautiously risk-on, with most equity markets advancing and China and Europe leading. The rally was uneven, however: semiconductors and South Korea fell sharply, energy prices weakened and gold rose, pointing to continued concern beneath the positive headline performance.

TOP THEMES THIS WEEK

1. AI financing raises questions about the quality of demand

Nvidia is pursuing financing arrangements reportedly exceeding $750 billion to accelerate investment in AI infrastructure. The scale supports continued spending across the AI supply chain, but concerns about circular financing raise the risk that reported demand is being amplified by suppliers funding their own customers.

2. Chinese competition challenges the semiconductor equipment industry

ASML shares fell after reports that Chinese companies had begun mass-producing specialised chipmaking equipment. This matters because faster Chinese localisation could weaken the long-term pricing power and market access of established Western suppliers while accelerating the development of a more separate Chinese semiconductor supply chain.

3. Companies are reassessing AI’s effect on employment

Several large US companies have resumed hiring after finding that AI systems still require skilled employees to implement, supervise and use them effectively. This suggests that AI adoption may change the composition of employment more quickly than it reduces total headcount, increasing the value of specialised technical and operational talent.

4. Equity leadership shifted away from semiconductors

China, Europe and most major equity markets rose, while semiconductors declined 4.20% and South Korea fell 3.60%. The divergence matters because it suggests that investors are rotating geographically and across sectors rather than expressing broad confidence in global growth or the established technology leadership.

WATCH THIS NEXT WEEK

Semiconductors. Their 4.20% weekly decline and 10.85% monthly fall contrast with gains in the S&P 500, Nasdaq and global equities. It is a rotation for now until weakness is seen in non-semi sectors.

INVESTMENT IMPLICATIONS

The combination of positive equity breadth, a weaker dollar and stable credit supports measured risk exposure, but the weakness in semiconductors, and Korea bears watching.