NEW YORK, July 8, 2026 – U.S. equities traded lower in late morning action, with the S&P 500 and Nasdaq both in negative territory amid weak market breadth. The Dow Jones Industrial Average was off 0.97%, the S&P 500 down 0.46%, and the Nasdaq composite lower by 0.31% as of 10:10 a.m. ET, according to Reuters. Decliners outpaced advancers by a 2.6-to-1 ratio on the New York Stock Exchange, while on the Nasdaq the ratio was 2.03-to-1.
AI Names Decouple from Memory Stocks
While the broader market struggled, several prominent artificial intelligence names moved higher. Broadcom (AVGO) climbed more than 4% after Apple (AAPL) announced it would spend over $30 billion on chips from Broadcom through 2031, with Broadcom committing $1.5 billion to expand a plant in Fort Collins, Colorado. Arista Networks (ANET) surged 5.2%, and Credo Technology Group (CRDO) added 3.8%. This rally in AI networking and connectivity stocks stood in contrast to weakness in memory chip names.
Micron Technology (MU) reported fiscal third-quarter revenue of $41.46 billion and non-GAAP gross margin of 84.9%, with fourth-quarter revenue guidance near $50 billion. CEO Sanjay Mehrotra highlighted the “strategic value of memory in the AI era,” yet the stock slipped about 0.5% after falling 4.7% on Tuesday. Samsung Electronics and SK Hynix also saw selling pressure despite strong earnings. The divergence reflects growing investor focus on free cash flow rather than capital expenditure plans.
Cash Flow Takes Center Stage After Capex Surge
Investors are now scrutinizing free cash flow generation after massive AI-related capex outlays. Microsoft (MSFT) reported Q3 capex of $31.9 billion and expects calendar 2026 spending near $190 billion. Alphabet (GOOGL) posted Q1 capex of $35.7 billion, with full-year guidance raised to $180-$190 billion, though its $462 billion cloud backlog provides some revenue visibility. Amazon (AMZN) saw trailing free cash flow drop to $1.2 billion as AI-driven property and equipment spending increased, and the company also tapped the bond market with a $25 billion offering. Meta Platforms (META) lifted its 2026 capex guidance to $125-$145 billion, citing higher component and data center costs.
The table below summarizes the cash flow dynamics:
- Microsoft (MSFT): Q3 capex $31.9B; 2026E capex ~$190B. Azure revenue up 40%. Strong demand but higher capex pressures free cash flow.
- Alphabet (GOOGL): Q1 capex $35.7B; 2026 capex raised to $180-$190B. Cloud backlog $462B. Revenue covered but depreciation and power costs rising.
- Amazon (AMZN): Trailing FCF dropped to $1.2B; AI-driven property spending up. $25B bond offering signals credit market attention.
- Meta (META): 2026 capex guidance lifted to $125-$145B; higher component costs. Suppliers may capture more spending if parts are scarce.
- Micron (MU): Q3 sales $41.46B; gross margin 84.9%; Q4 guidance near $50B. Sellers with tight supply book margins now.
Market Breadth Weakens; Energy and Oil Surge
Market breadth remained narrow, with the equal-weight S&P 500 ETF underperforming the cap-weighted version by 1.3%. The VanEck Semiconductor ETF (SMH) was flat after Tuesday’s drop, while energy shares caught strong buying. The Energy Select Sector SPDR Fund (XLE) rose 1.9%, and the United States Oil Fund (USO) surged 4.3% after President Donald Trump declared the interim Iran nuclear deal “over.”
The narrow tape keeps the index elevated but limits active traders’ risk appetite for earnings misses. Investing.com noted the S&P 500’s anchored VWAP from the April low, around 7,259, as a key support level. The index stood at 7,469.53 late Wednesday morning, about 2.9% above that mark.
Fed Minutes and Oil Costs in Focus
The Federal Reserve held rates steady at 3.50%-3.75% in June, with inflation running at about double the 2% target. Markets are pricing roughly a 70% chance of a rate hike by September, according to Reuters. Steve Englander at Standard Chartered suggested Chair Kevin Warsh is unlikely to let any guidance slip through the minutes. For AI investors, higher energy costs and potential rate tightening add another layer of uncertainty.
Overall, the AI trade is fragmenting. Companies with order visibility and pricing power—like Broadcom, Arista, and Credo—are gaining, while those needing to spend heavily upfront and wait for payback face headwinds. The market is now demanding proof of cash flow, not just capex plans.
