On the last trading day of July, the three major US stock indexes closed mixed. The Nasdaq Composite edged down 0.2%, while the Dow Jones Industrial Average rose for a third consecutive session. Beneath the calm surface, structural contradictions exposed by this earnings season have become unavoidable for market participants — investors are voting with their feet over the gap between the grand AI narrative and current profit reality.
Earnings season's ice and fire: AI giants under pressure, traditional industries recovering
As of July 30, more than 55% of S&P 500 constituents had reported second-quarter earnings. Overall market earnings beat expectations by about 3.2%, but the breakdown shows a clear polarization. Large tech stocks represented by the "Magnificent Seven" continued to deliver double-digit revenue growth, yet the capital markets reacted unusually coolly. For example, a leading cloud computing company beat expectations by more than 10%, yet its stock fell more than 4% after hours — because its capital expenditure surged 45% year over year, far exceeding the 30% analysts had forecast.
In contrast, industrial, materials, and financial sectors delivered better-than-expected results. Benefiting from supply chain restructuring and the rollout of infrastructure investment, several traditional industrial heavyweights raised their full-year guidance. This rotation of "tech falling, traditional rising" stands in stark contrast to the first half of the year, when money piled into AI concept stocks.
Wall Street strategists note that the market is shifting from "concept-driven" to "cash-flow validation." The massive investment in AI infrastructure, like the telecom bubble of the past, has spurred demand for chips, electricity, and data centers in the short term, but the timeline for realizing returns is increasingly questioned. A recent Morgan Stanley report shows that AI-related investment now accounts for 38% of total tech sector capital expenditure, while its contribution to actual revenue is only 11%.
Rising rate-cut expectations: a belated wave or a trap?
In the early morning of July 31 Beijing time, the Fed's latest rate decision held steady as expected, but the policy statement used the phrase "further progress on inflation" for the first time, which the market read as opening the door to a September cut. CME rate futures show the probability of a 25-basis-point cut in September has risen to 78%.
The rising rate-cut expectations have given small-cap and rate-sensitive sectors some breathing room. The Russell 2000 has gained 5.6% over the past 10 trading days, while the S&P 500 rose only 1.2% in the same period. Investors are beginning to reassess whether liquidity sucked in by tech giants over the past year will flow back to undervalued areas. However, some cautious voices warn that if the rate cut is merely due to weakening economic data rather than a true "soft landing," risk assets may fall into a deeper correction after a brief rally.
As for global capital flows, a potentially weaker dollar could catalyze capital inflows into emerging markets. Goldman Sachs observed that about $3.5 billion has flowed into Asian markets via ETFs over the past two weeks, with the Philippines, Indonesia, and Vietnam as the main destinations.
Capital spillover: Vietnam's market sees a "second look" opportunity
The momentum shift in US stocks is quietly changing global capital allocation routes. As a key node in Southeast Asia's manufacturing chain, Vietnam not only benefits from sustained FDI inflows driven by supply chain diversification, but its capital market is also gaining greater visibility among international investors.
The VN-Index rose 3.8% in July, and foreign investors' net buying on the Ho Chi Minh Stock Exchange reached 2.1 trillion Vietnamese dong, an eight-month high. In particular, export-oriented blue chips such as textile and electronics assembly companies have seen significant demand recently. A foreign fund manager based in Ho Chi Minh City said: "After US tech stocks get overvalued, capital naturally looks for the next growth story. Vietnam has a young population, improving infrastructure, and a gradually opening financial system — it is at the tipping point from 'story to earnings.'"
However, currency stability remains a key variable for sustained foreign capital inflows. The State Bank of Vietnam maintained a flexible exchange rate management strategy in July, keeping the USD/VND spot rate in a narrow band and controlling the annual depreciation within 1%. This has undoubtedly boosted international investor confidence.
Second-half outlook: finding certainty amid uncertainty
Looking ahead to the second half of 2026, the US stock market faces several key tests. First, whether AI capital expenditure can translate into actual revenue growth will become clearer over the next two earnings seasons. Second, fiscal policy uncertainty before the US election may add extra volatility. Third, global geopolitical risks, including the Middle East situation and potential escalation of trade frictions, remain downside factors that cannot be ignored.
For global investors, the era of betting solely on tech stocks for excess returns is passing; a more pragmatic approach is to build hedge portfolios across markets and asset classes. Emerging markets like Vietnam, with their low correlation, are gradually becoming options to improve risk-adjusted returns. With Vietnam's stock market capitalization at only 68% of GDP, well below other Southeast Asian economies, the long-term upside deserves attention.
John Templeton once said: "Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria." The current US market seems to be moving from optimism to maturity. And smart money has already begun looking for the next uncrowded fertile ground.
No matter how the market changes tune, only investors who grasp long-term fundamental momentum through in-depth research while respecting risk can truly ride through cycles and earn steady returns.
