The Nasdaq Composite surged 2.53% on August 4, 2026, as strong earnings from Big Tech companies and accelerating cloud revenue growth fueled a sharp reversal in technology stocks after a volatile July.
The gains were part of a broader four-day rally that lifted the Nasdaq Composite more than 7.6% higher, according to Barron’s. The surge reflects renewed investor confidence in the so-called Magnificent Seven mega-cap tech giants, particularly those benefiting from the artificial intelligence infrastructure boom.
Cloud revenue growth among the three largest hyperscalers provided the clearest evidence of AI’s real-world impact. Google reported cloud growth of 82%, Microsoft 43%, and Amazon 37%, according to Société Générale’s analysis cited in Barron’s. Backlogs for these services rose by $300 billion, while capex guidance increased by $150 billion, signaling sustained demand for AI infrastructure.
Société Générale analysts described the sudden market shift as a “momentum shock” that cleared the way for a potential run higher in megacap tech stocks. The reversal came after a challenging July marked by the highest Treasury yields since 2007 and renewed U.S.-Iran tensions that spiked oil prices.
The rally also marked a dramatic rotation within the technology sector itself. Software stocks, which had been beaten down for much of the year amid AI disruption fears, rebounded 5.8% over the past month. The iShares Expanded Tech-Software Sector ETF gained more than 18% from its June 25 low, with Salesforce, Workday, and ServiceNow each jumping 15% to 25% over the past week, according to Morningstar.
By contrast, chip stocks pulled back sharply. The PHLX Semiconductor Index fell 18.5% from its late June peak, with memory chip makers like Samsung, SK Hynix, Intel, and Micron each down roughly one-third over the past month, Morningstar reported. This divergence reflected investor anxiety about whether AI capex spending would deliver returns to justify lofty semiconductor valuations.
The rotation into software and away from chips echoed past market reversals when investor enthusiasm for a single trade had reached extremes. ING’s global chief investment officer Bob Homan drew parallels to record runs in Bitcoin and gold, noting that “the fast money is a little bit behind” semiconductor stocks. Software valuations now trade at just a 6% premium to the S&P 500, compared with a 10-year average premium of 36%, making them attractive to value-conscious investors even as earnings growth continued at a robust 24% pace for the year, according to Deutsche Bank.
Microsoft shares turned positive for the year in early Tuesday trading, having gained nearly 27% since their better-than-expected June earnings. Google was up around 18% and Amazon more than 20% over the same timeframe. The Magnificent Seven index itself rose more than 5.3% over the past month, leaving it just 3.1% below its all-time high from late May.
Sources
- Barron’s — Nasdaq Composite surge, Big Tech earnings, cloud revenue growth figures, Société Générale analysis, software and chip stock performance
- Morningstar — Software sector rebound, chip stock declines, investor rotation details, earnings growth forecasts
