US equity markets rebounded strongly for a second consecutive week, with the Nasdaq Composite surging 5.2%, the S&P 500 up 3.6%, and the Dow up 3%, with both the S&P and Dow closing at record highs Friday. The iShares Semiconductor ETF (SOXX) jumped 7.6%, more than double the Dow's gain. Nvidia closed the week up 11%—its best weekly performance in over a year—while semiconductor and data center stocks rallied broadly after a week of heavy pressure in early August.
The catalyst: forced liquidation of Situational Awareness, the leveraged hedge fund founded by former OpenAI researcher Leopold Aschenbrenner, which collapsed last week. That forced unwinding triggered indiscriminate selling across AI infrastructure names, pushing fundamentally sound companies well below fair value. As one money manager called it, the liquidation was a "clearing event" that removed a major overhang, allowing earnings and fundamentals to reassert control over technical selling.
On earnings and guidance, SpaceX reported better-than-expected revenue and earnings but announced Q2 capex of $18.4 billion, well above expectations. On the call, CEO Elon Musk said SpaceX will build its AI infrastructure "exclusively on Nvidia" because he believes Vera Rubin is "the best AI computer." The endorsement reinforced Nvidia's position as the leading AI infrastructure supplier, even as hyperscalers continue investing in custom silicon.
Traders are watching whether the leverage unwind is complete and whether demand for AI infrastructure remains robust enough for multiple winners. Microeconomic data helped: nonfarm payrolls unexpectedly fell 23,000 in July, prompting traders to lower Fed rate-hike expectations for September from 45% to 55% unchanged. With capex cycles accelerating and GPU shortage persisting, the broader thesis that AI buildout will drive multi-year capex for Intel, AMD, Nvidia, and suppliers like Corning remains intact.