Stock Market at the End of July 2026: AI Stocks Fall as Microsoft and Amazon Surge

July closed with a split market. Amazon and Microsoft gave investors proof that cloud and AI spending can produce faster revenue growth, yet the broader chip trade suffered its worst month since the 2008 financial crisis. Canadian investors finished the month with a stronger domestic growth report, an elevated oil price and a TSX that did not follow every turn in the Nasdaq.

The July 31 close

US stocks recovered on the final Friday. The S&P 500 rose 0.7% to 7,489.72, the Dow added 0.5% to 52,485.03 and the Nasdaq gained 1.0% to 25,373.85. The rebound gave the S&P 500 its first winning week in three, but the index still finished July with a 0.1% loss. The Dow gained 0.3% for the month and the Nasdaq fell 3.2%.

Oil and bond yields kept pressure on valuations. Brent crude settled at US$87.93 a barrel on July 31 after trading between US$72 and US$102 during the month. The US 10-year Treasury yield reached about 4.71%, up from 3.97% before the Iran war pushed oil higher. A higher long-term yield raises the discount rate investors apply to future profits, which hits expensive growth stocks first.

The S&P/TSX Composite closed July 31 at 35,226.14, down 279.70 points for the day. The index had set a record close of 35,568.14 on July 27, when Shopify jumped 11.6% and the Canadian technology sector gained 6.9%. Canada ended the month close to that record even as US chips suffered a deep correction.

AI stocks dropped because expectations outran the numbers

The Philadelphia Semiconductor Index lost 20.6% in July, its worst month since October 2008. The selloff reached $NVDAShow price, memory producers and semiconductor-equipment companies. On July 29, Nvidia fell 3.6% and KLA lost 10.8%. South Korea's SK Hynix dropped 9.6% even after record revenue and profit because its 257% revenue growth missed the market's target.

Investors focused on three questions: how fast AI revenue can grow, how much cash each company must spend to create that growth and whether the stock price already assumes a perfect result. Strong sales did not protect a company if management raised capital spending or missed an aggressive estimate.

$MUShow price captured the month's volatility. Micron jumped 18.4% on July 30 as Microsoft revived the AI trade, then fell 5.9% on July 31 after swinging from a 6.4% opening gain to a 6.5% intraday loss. A business can have firm demand for high-bandwidth memory and still deliver a painful stock move when traders cut exposure across the sector.

Microsoft delivered a historic answer

$MSFTShow price rose 15.5% on July 30, its best session in close to 18 years. FactSet data cited by Axios put the one-day market-cap increase near US$450 billion, the largest one-day gain recorded for a public company at the time.

The earnings report earned that reaction. Microsoft Cloud revenue reached US$59.3 billion, up 27% from a year earlier. Azure and other cloud-services revenue grew 43%. Azure passed US$100 billion in annual revenue for the first time, while Microsoft 365 Copilot exceeded 30 million paid seats.

Microsoft also reported fiscal-year revenue of US$331.8 billion, up 18%, and GAAP net income of US$133.7 billion, up 31%. The stock response gained force because management did not pair the strong cloud result with another large increase to its AI spending plan. Investors saw faster AI-linked revenue without a fresh capex shock.

Google posted exceptional growth and still got sold

$GOOGLShow price reported second-quarter revenue of US$119.8 billion, up 24%. Google Cloud revenue grew 82% to about US$24.8 billion and its backlog reached US$514 billion. Search and Other revenue rose 17%, while YouTube advertising revenue increased 13%.

Those results showed that Google can sell AI infrastructure and protect its advertising engine at the same time. Operating income reached about US$40.8 billion, up 30%. The market focused on the cash required to keep that growth rate. Alphabet lifted its 2026 capital-spending forecast to US$195 billion to US$205 billion from US$180 billion to US$190 billion, and the stock fell 7% on July 23.

Google's July 31 rebound of about 6.7% showed how fast the verdict can change. Microsoft and Amazon gave investors a stronger read on cloud demand, which improved sentiment toward Alphabet even though its own spending plan had not changed.

Amazon turned AWS growth into a 15% stock gain

$AMZNShow price rose 15.3% on July 31. Second-quarter sales reached US$200.6 billion, up 20%, and operating income rose 43% to US$27.5 billion. AWS sales increased 37% to US$42.2 billion, the fastest growth rate in 18 quarters, while AWS operating income reached US$16.6 billion.

Amazon's US$62.6 billion net income included US$53.4 billion of pre-tax other income tied in large part to its Anthropic investment, so operating income gives a cleaner view of the quarter. The cash-flow line also deserves attention: trailing 12-month free cash flow moved to a US$7.6 billion outflow as property and equipment purchases rose by US$66.1 billion.

Management increased its 2026 capital-spending plan to US$220 billion from US$200 billion, with memory costs contributing to the increase. Investors accepted the higher bill because AWS growth accelerated, AWS AI and chip businesses each passed US$25 billion annual run rates, and management said demand still exceeds capacity.

Canada's economy entered the summer with more momentum

Statistics Canada reported that real GDP by industry grew 0.3% in May, its second monthly increase. Goods-producing industries expanded 0.6% and services rose 0.2%, with 13 of 20 sectors contributing. The advance estimate points to 0.2% growth in June and 0.8% growth across the second quarter.

Resource activity led the May report. Mining, quarrying, and oil and gas extraction grew 1.0%. Oil and gas support activity rose 7.3%, oil extraction increased 0.7% and oil-sands extraction gained 1.6%. Construction grew 0.8%, real estate and rental activity rose 0.4%, and finance and insurance added 0.3%. Rail transportation grew 0.7% on grain and intermodal volumes.

The Bank of Canada held its policy rate at 2.25% on July 15. It described a recovery from a weak first quarter, with the June unemployment rate at 6.5%. The Bank also reported May inflation of 3.2%, driven by gasoline, while inflation excluding gasoline stood at 2.2%. Higher oil supports producers and provincial revenue, but it also raises transport costs and can keep interest rates higher for longer.

Specific Canadian stocks to watch

Shopify and Celestica: Canada's growth-stock pair

$SHOPShow price gives the TSX a large e-commerce and software growth stock. Its 11.6% jump helped the TSX reach a record on July 27, then the US-listed shares fell about 4.3% on July 31. Shopify responds to merchant spending, consumer demand and the valuation investors assign to future cash flow. It can move with US technology even though it sits inside Canada's index.

$CLSShow price gives Canadian investors direct exposure to data-centre hardware, networking and advanced manufacturing. The US-listed shares fell about 6.1% on July 31 as the chip trade weakened. Celestica can benefit from AI infrastructure orders while carrying the same expectation risk that hit US semiconductor stocks this month.

Royal Bank and TD: the domestic growth test

$RYShow price and $TDShow price offer exposure to Canadian deposits, mortgages, business lending and capital markets. A 0.8% second-quarter GDP estimate supports credit demand and fee revenue. The 6.5% unemployment rate and a long period of expensive borrowing keep loan losses, mortgage renewals and household cash flow in focus.

Banks can gain from a firm economy and a stable rate environment, but each bank carries a different mix of Canadian housing, US operations, wealth management and trading revenue. Compare credit-loss provisions and common-equity capital with headline earnings.

Canadian Natural Resources and Suncor: oil works both ways

$CNQShow price and $SUShow price connect portfolios to Canadian oil production. May's extraction growth and Brent near US$88 support revenue. The same oil shock can raise inflation, weaken consumers and push bond yields higher. Production levels, operating costs, refining margins and capital returns will decide how much of the oil-price gain reaches shareholders.

Canadian National Railway: the real-economy gauge

$CNIShow price is Canadian National Railway's US-listed symbol; the TSX symbol is CNR. Statistics Canada's 0.7% May increase in rail transportation came from grain, wheat and intermodal carloadings. Rail volumes give investors a direct view of trade, manufacturing and resource shipments, with fuel costs and labour productivity shaping margins.

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Frequently asked questions

Did the AI bubble burst in July 2026?

July delivered a sharp correction in AI-linked chips, with the Philadelphia Semiconductor Index down 20.6%. Microsoft, Google and Amazon also reported fast cloud growth. The month reset prices and expectations without ending AI investment or demand.

Why did Microsoft rise while Google fell after strong earnings?

Microsoft paired 43% Azure growth with no large increase to its spending plan. Google delivered 82% cloud growth but raised its annual capex forecast to as much as US$205 billion. Investors paid more for visible revenue and punished new spending commitments.

Why did Amazon rise after increasing capex?

AWS growth accelerated to 37%, its fastest rate in 18 quarters, and AWS operating income reached US$16.6 billion. That result gave investors more confidence that Amazon can turn its spending into revenue and profit.

Does stronger Canadian GDP make every Canadian stock a buy?

The GDP report supports different businesses in different ways. Banks gain from credit activity, energy companies gain from production and oil prices, and railways gain from freight volumes. Valuation, company costs and balance-sheet quality still determine the investment result.

Are the ticker prices in this article current?

Yes. Tap or hover a $ticker to request the latest available quote from Canooq's Alpaca-powered API. The pill shows the current US-dollar price and the daily percentage move for the US listing. Market-data feeds can be delayed, so use your broker's order screen for the executable price.

Bottom line

July proved that AI revenue and AI stock prices can move in opposite directions. Microsoft produced a record market-value gain, Google paired huge cloud growth with a capex-driven selloff, and Amazon won support for a larger spending plan because AWS accelerated. Chip stocks still finished the month with a 20.6% drop.

Canada entered August with firmer GDP, a 2.25% policy rate and an index shaped by banks, energy, materials, Shopify and industrial companies. Use the live ticker prices to check the market, use IBKR to keep US trading and currency costs low, and choose the business exposure before choosing the stock.