AI-Fueled Tech Shares Cushion September’s Broader Market Slide

The Nasdaq Composite gained 1.8% in September, supported by Meta, AMD and other semiconductor stocks. The S&P 500 slipped 0.4%, while the Dow Jones Industrial Average fell about 4.3% and the Russell 2000 dropped 5.4%.

The Nasdaq reached a new peak on Sept. 22. The S&P 500 ended the month 1.9% below its August record. September has been the index’s weakest month historically, with an average decline of 0.6% since 1950.

Interactive Brokers chief strategist Steve Sosnick summed up the split as “AI or bust.” He said that beneath the relative strength in the Nasdaq and S&P 500, “there's a lot not to like.”

Treasury yields climbed sharply during the month. The two-year and 10-year yields each rose roughly half a percentage point, while the 30-year yield gained nearly 40 basis points. The last time all three moved by that much was September 2022, during the Federal Reserve’s last hiking cycle.

Market uncertainty also weighed on planned public offerings. Smart-ring maker Oura postponed its offering, while Anthropic reportedly moved its planned debut from October to November.

UBS chief economist Arend Kapteyn said AI-related investment and the wealth effect from rising AI stocks account for at least 80% of US economic growth. UBS raised its estimate for AI-driven capital spending next year by $200 billion to $1.4 trillion.

Kapteyn warned that a sudden reversal could weaken both business investment and consumer spending. But he said AI spending may be spreading: each dollar of AI-related capital spending this quarter appears to prompt about $1.50 in investment the following quarter, with only about a third of that follow-on spending going to technology.