US Tech Pullback Digests High Valuations; Nasdaq Weekly Pressure, Long-Term Logic Intact

July 29, 2026 – The three major US stock indexes had mixed results. The Nasdaq Composite Index edged down 0.4% after three consecutive days of recovery, closing near 18,620 points. The S&P 500 slipped 0.1%, while the Dow Jones Industrial Average rose 0.2%, supported mainly by financial and energy sectors. This week, the Nasdaq has accumulated a decline of about 1.8%, the largest weekly drop in five weeks, with tech stock pullback becoming the main market focus.

Tech Stocks at High Levels: Valuation Adjustment Pressure Emerges

This week, Nasdaq 100 components faced overall pressure, especially AI concept stocks and semiconductor leaders that had risen sharply earlier. NVIDIA (NVDA) fell over 4% for the week, AMD (AMD) dropped more than 3%, and major tech giants like Microsoft (MSFT) and Apple (AAPL) also declined to varying degrees. Analysts point out that the average P/E ratio of the tech sector has exceeded 35 times, near historical highs. Concerns over the upcoming earnings season and the Fed's policy path have prompted some funds to take profits.

“Tech stocks have accumulated huge gains over the past year, and it is normal for them to enter a digestion phase now,” said James Park, Chief Investment Strategist at Bank of New York Mellon, in a latest report. “Valuations need to be validated by earnings, and the market is becoming more picky about high-growth expectations.” The preliminary reading of US Q2 GDP, to be released Thursday, is expected to show growth slowing. If the data misses expectations, it could further increase tech stock volatility.

Fed Meeting Next Week: High Probability of Holding Steady, but Wording Key

Next week (August 4-5), the Federal Reserve will hold its latest policy meeting. According to the CME FedWatch tool, market expectations for the Fed to hold rates steady at this meeting are as high as 96%, but pricing for a September rate cut has fallen from 45% a week ago to 32%. Inflation data has rebounded in the past two months, with the June core PCE price index rising 2.9% year-on-year, above the expected 2.8%. This has made hawkish voices within the Fed louder.

“We expect the Fed to keep rates unchanged, but the wording may emphasize inflation stickiness more strongly,” noted Michael Feroli, Chief US Economist at JPMorgan, in a memo to clients. “Any signal that rate cuts might be delayed could trigger short-term market adjustments, especially for interest-rate-sensitive tech stocks.” Additionally, the 10-year US Treasury yield climbed again this week to around 4.35%, the highest level since July, putting pressure on high-valuation growth stocks.

Earnings Season: Tech Giants Show Divergent Performance; Cloud Computing Still the Strongest Engine

With the US Q2 earnings season now half-way through, the tech sector shows divergent performance. Microsoft (MSFT) and Google (GOOGL), which have reported earnings, both beat expectations in cloud business. Microsoft Azure cloud revenue grew 32% year-on-year, while Google Cloud revenue increased 30%, both above market expectations. However, weak demand for consumer electronics caused Apple (AAPL) iPhone sales to slightly miss expectations, weighing on its stock. Amazon (AMZN) and Meta (META) are set to report earnings next week, with the market broadly focused on their AI spending and monetization paths.

“The long-term growth logic for cloud computing has not changed. Enterprise digital transformation and AI computing demand are still accelerating,” said Brad Sills, Software Industry Analyst at Bank of America. “But short-term stock price volatility is inevitable. We recommend investors focus on high-quality names with solid cash flow and clear buyback plans.”

Sector Rotation Signal: Value Stocks and Small/Mid Caps Attract Funds

Notably, this week saw funds flowing from large-cap tech stocks to value sectors such as financials, energy, and industrials. The S&P 500 Financials Index rose 1.5% this week, and the Energy sector gained 1.2%. The small-cap Russell 2000 Index bucked the trend and rose 0.8% this week, indicating that overall market risk appetite has not fully deteriorated but shows rotation characteristics.

“When tech stock valuations are too high, money looks for relatively cheap opportunities,” said Jeffrey Buchbinder, Chief Market Strategist at LPL Financial. “In the context of possibly delayed rate cut expectations, value stocks tend to perform better because they are less sensitive to interest rates.”

Outlook: Short-Term Volatility, Bullish Medium to Long Term

Looking ahead, the market generally expects the Nasdaq to oscillate in the 18,000-19,000 range in the short term, awaiting more fundamental signals. The Fed's decision next week and heavy earnings from Apple, Amazon, etc. will be key catalysts. Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, said: “We maintain an overweight recommendation on US stocks, especially AI and cloud-related names. Although there may be short-term pullbacks, the long-term growth trend has not changed. Investors should use volatility to buy good companies on dips while paying attention to diversification.”

For Asian investors, the current Nasdaq adjustment may offer a better entry opportunity. It is recommended to watch support levels during this week's decline as well as market reactions after next week's earnings releases. Maintain reasonable positions, avoid chasing rises and panic selling, and holding for the long term remains the best strategy to cope with volatility.

As of press time, US stock futures pointed to a slightly higher opening Thursday, with the market awaiting the GDP data release.