Global Stock Markets Face Sharp July Sell-Off Amid AI and Geopolitical Concerns

July, typically a strong month for global equity markets, is ending in the red this year, with Wall Street's tech-heavy Nasdaq leading the downturn. Despite some late-month gains, fears over the return on investment in artificial intelligence, which demands heavy spending, and geopolitical tensions in the Middle East have driven significant selling. Retail investors recorded the largest net sales of individual stocks since the COVID-19 pandemic, according to Vanda Research data cited by Investopedia.

The semiconductor sector, a recent market favorite, reversed course sharply. Philadelphia's semiconductor index erased gains from the past three months, falling double digits in July. Experts attribute the decline to concerns about Chinese competition, slowing AI infrastructure investments, geopolitical instability, profit-taking, and shifting capital to other sectors. Memory chip stocks, previously leading gains, suffered notable losses: SK Hynix dropped about 11% since its Nasdaq listing despite strong earnings, and Sandisk plunged over 35% from its June peak, wiping out nearly $195 billion in market value after soaring 884% earlier this year.

The Korean Kospi index, heavily weighted with memory chip giants SK Hynix and Samsung Electronics, fell over 21% this month but remains up double digits year-to-date. In the S&P 500, Sandisk fell more than 55% in July yet remains the best-performing stock since the start of the year. Micron also declined 24%, despite strong quarterly results. Conversely, Apple led gains among the "Magnificent Seven" tech stocks with a 23% rise before slipping 4% post-earnings; it briefly surpassed a $5 trillion market cap. Software firm Intuit jumped 21% but remains down 49% year-to-date after recent layoffs.

In Israel, energy stocks Bazan and Tamar Petroleum rose 26.1% and 24.5%, respectively, while software company Nice surged 20.8%. However, chip equipment maker Nova and Tower Semiconductor declined 19.3%, alongside real estate firms Electra Real Estate and Mega Or, which fell over 19%. The local IPO market cooled with several planned offerings canceled or postponed due to market conditions and institutional investors demanding lower valuations.

The Israeli shekel weakened after a strong start to the year, with the dollar rising from 2.81 to about 3.09 shekels since June. Meitav's chief economist Alex Zvezhinski noted the shekel's unusual decoupling from U.S. stock market trends, likely due to increased foreign currency exposure by investors.

Among Israeli companies reporting Q2 earnings, Teva Pharmaceuticals saw its stock jump nearly 10% on raised revenue forecasts despite missing profit estimates. Conversely, Fiverr, Lemonade, and Radware shares dropped sharply after earnings, reflecting market skepticism about AI impacts and future guidance. Mobileye shares fell almost 15% amid CEO Amnon Shashua's planned departure announcement. Check Point also declined after missing revenue forecasts, while Pagaya surged following strong financial results.