The stock market began September on unstable ground, with the S&P 500 gaining only 0.1% and the Nasdaq 0.4% for the week, despite both indexes achieving five weekly gains out of the last six.
A stronger-than-expected jobs report led to higher bond yields, with the 2-year Treasury yield reaching its highest level since January 2025, raising inflation concerns amid escalating tensions between the U.S. and Iran. The likelihood of a Federal Reserve interest rate hike in September increased to 58% from 49.4%.
In response to these market conditions, portfolio managers reduced exposure to top AI stocks, which have recently underperformed despite strong earnings. For instance, they trimmed their holdings in Palo Alto Networks, securing a 148% gain, and exited Corning with a 52% gain, reallocating funds into more defensive stocks like BNY and Kimberly-Clark.
Broadcom's strong earnings did not translate into stock price appreciation, leading to a lowered price target from $480 to $430, as concerns about customer concentration and vendor financing persisted. Meanwhile, Nvidia's acquisition of Hugging Face for $12.9 billion is seen as a strategic move to enhance its AI ecosystem, drawing comparisons to Microsoft's GitHub acquisition.
Despite a 22% increase in Nvidia's stock this year, it remains undervalued at 14 times next year's expected earnings, suggesting potential for further growth