Markets spent the week balancing two competing narratives.

On one side, easing geopolitical tensions and falling oil prices continued to support the macro backdrop. On the other, investors began questioning whether the AI trade can continue justifying increasingly stretched valuations.

By mid-week, earnings helped restore some confidence.

The week began with renewed pressure on technology stocks.

Alphabet declined after another high-profile AI researcher departed for Anthropic, while SpaceX suffered a sharp post-IPO selloff despite continuing to raise capital for its AI ambitions.

By Tuesday, the weakness spread across global markets.

AI-linked semiconductor stocks led declines, dragging the Nasdaq lower and pushing South Korea's KOSPI into correction territory as investors questioned whether record AI spending can continue to support current valuations.

• Technology stocks sold off
• Bitcoin recorded its biggest decline in weeks
• Gold and industrial metals moved lower
• The US dollar strengthened as investors sought defensive positioning

The AI trade is no longer rising in a straight line. Markets are becoming increasingly selective.

Geopolitics continued moving in a more constructive direction.

Progress in US-Iran negotiations helped remove much of the geopolitical premium from energy markets.

Brent crude fell from below $78 early in the week to below $74 by Wednesday as expectations grew that Iranian oil exports would continue recovering.

• Ease inflation concerns
• Support Treasury prices
• Reduce expectations for further Fed tightening
• Improve the broader macro backdrop for risk assets

By Wednesday, sentiment improved following Micron's results.

The company's strong outlook reinforced confidence that demand for AI infrastructure remains robust despite growing valuation concerns.

Micron surged after hours, lifting the Nasdaq and helping restore confidence across semiconductor stocks.

Meanwhile, competition within AI continued to intensify as OpenAI unveiled its first custom AI chip, while Anthropic and Google remained locked in an increasingly competitive battle for both talent and technology leadership.

• AI investment → Earnings → Equity leadership → Oil → Inflation expectations → Central bank policy

• AI remains the dominant market driver
• Valuation concerns are creating greater volatility
• Lower oil prices are easing inflation pressures
• Fed expectations have become less hawkish
• Strong earnings remain the key test for AI leadership

Markets are no longer rewarding AI stories alone.

They are rewarding AI results.