Pressure on Non-Tech Stocks as AI Boom Causes Capital Drain

On October 3, the U.S. stock market showed increased divergence in September, with the S&P 500 index remaining relatively stable while the Nasdaq 100 index rose by 3%. However, nearly 80% of the stocks in the S&P 500 declined, with an average drop of about 5%. Among the 11 sectors, only technology and communication services saw gains. During the same period, the Russell 2000 index fell by 5%, while the 50 largest stocks by market capitalization increased by 2%.

The rising stocks are generally related to AI or the data center supply chain. The yield on the U.S. 10-year Treasury bond rose from 4.7% to 5.3%, putting non-AI companies under triple pressure from interest rates, energy prices, and competition from AI firms for employees, equipment, and capital.

UBS Chief Economist Arend Kapteyn pointed out that U.S. capital expenditures are essentially zero when excluding AI tech companies. Rising financing costs have led to an expansion of corporate credit spreads, with the spread on CCC-rated low-rated bonds increasing by more than 1 percentage point in September, surpassing levels seen during last year's tariff shock in the U.S.

Wall Street's expectations for corporate profit growth have begun to cool. Christian Mueller-Glissmann, head of asset allocation research at Goldman Sachs, noted that profit and profit expectations grew rapidly in the first half of this year, but the momentum for profit growth has weakened since the summer. The article suggests that if bond yields and oil prices remain high, industries outside of AI may continue to face pressure, leading to a slowdown in corporate profit growth and potentially increasing concerns about credit risk.

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