10/6/2026
WSJ Wednesday 10/7
The AI trade is propelling stocks to new heights—and it is dragging the rest of the market along for the ride.
The S&P 500 and Nasdaq composite blew past new closing records on Tuesday, the latest leg of a rally that has powered through everything in its path, from the Federal Reserve’s decision to raise rates for the first time in three years to a monthslong war that lifted oil prices to $100 a barrel.
Increasingly, the market is running on one engine: a familiar cast of tech companies that are building out (and benefiting from) the AI revolution. Nvidia, whose grip as the dominant supplier of chips that power AI has made it the world’s most-valuable company, has jumped 4.5% in the past week to a new all-time high. Meta Platforms is up 24% since Aug. 13, when the S&P 500 had its previous high.
Just about everything else is going down. Shares of healthcare firms, banks and consumer staple companies are declining. So are small-cap stocks. And blue chips, like the Dow industrials.
The yawning gap between the market’s biggest winners and other stocks is growing larger. Less than half of the stocks in the S&P 500 closed above their 200-day moving average on Tuesday, Dow Jones Market Data shows, a figure that has steadily declined since August.
The AI powerhouses have grown so vast, and the momentum behind AI’s build-out so relentless, that many investors now see these stocks as immune to the effects of higher interest rates, analysts said. The hope is that eye-watering earnings forecasts will keep propelling tech names forward, even with higher rates and a cooling economy bearing down on the rest of the market.
“People look around and say ‘Which areas of the market can weather this?’” said Keith Lerner, chief investment adviser for Truist Advisory Services. “Tech is almost seen as defensive in some ways.”
Big tech companies—particularly AI “hyperscalers” including Alphabet, Amazon, Microsoft and Meta—have been traditionally known as cash-rich and relatively debt-free companies that can keep growing even when borrowing costs rise.
Many of those companies are now raising tens of billions of dollars to finance the AI build-out, but their rising debt loads haven’t yet given investors a reason to look elsewhere. Compared with other companies, they are still more likely to grow through higher rates, said Dan Russo, chief investment officer at Potomac Fund Management.
“Higher interest rates and inflation are taking a toll on other stocks in the S&P 500,” Russo said. “It’s only the fortresslike balance sheets at the large-cap end of the spectrum that are propping the market up.”
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