Markets entered the week attempting to resume their AI-driven rally before a combination of sector rotation, geopolitical uncertainty, and valuation concerns pushed equities lower.

After weeks of AI-led gains and repeated record highs, investors are beginning to question whether leadership can broaden or whether markets remain overly dependent on a handful of technology names.

By mid-week, that question became the dominant theme.

The week started positively as dip buyers returned following the previous selloff.

Nvidia and Micron surged, helping the Nasdaq 100 outperform as investors once again rotated into semiconductor names. Markets were encouraged by signs that the economy remains resilient and capable of supporting earnings growth.

However, the tone shifted quickly.

• AI-related equity issuance continued to rise
• Questions emerged around valuation sustainability
• Investors became increasingly sensitive to signs of speculative excess

The AI trade remains the market leader, but leadership is becoming more volatile.

Alongside technology weakness, geopolitical risk moved back into focus.

Early hopes for a diplomatic path between the United States and Iran faded as tensions escalated throughout the week.

Trump warned of additional strikes following fresh attacks linked to Iran, while delays in negotiations increased uncertainty around any potential agreement.

• Oil rebounded toward $90 per barrel
• Treasury yields moved higher
• Inflation concerns returned
• Risk appetite weakened across equities

The prospect of reopening the Strait of Hormuz remains a key variable for global energy markets.

Despite weakness in technology, the market story is not entirely risk-off.

Earlier in the week, investors rotated into a wider range of sectors and companies, helping cushion broader declines. This suggests capital is not necessarily leaving equities but is becoming more selective.

• Geopolitics → Oil → Inflation expectations → Yields → Equity leadership → AI liquidity flows

• AI remains the dominant market theme
• Technology leadership is becoming more volatile
• Oil is responding directly to developments in the Middle East
• Inflation concerns are re-emerging through energy markets
• Investors are increasingly rotating beyond megacap technology

The trend remains intact.

The leadership driving it is being tested.