It was a challenging week for US equity markets as investors contended with a combination of renewed inflation concerns and growing questions around the sustainability of spending across the artificial intelligence (AI) ecosystem. The Nasdaq fell -4.5% (in dollar terms), with much of the weakness concentrated in memory, semiconductor and broader AI-related companies that have been at the forefront of market performance in recent years. The selling pressure became increasingly pronounced as the week progressed, with the closely watched Philadelphia Semiconductor Index recording its longest losing streak since the Global Financial Crisis. Friday proved particularly painful for many of the market's recent winners, as investors reassessed valuations and near-term growth expectations across the sector.
Adding to the pressure was a stronger-than-expected US inflation backdrop. September CPI inflation accelerated to +3.7%, exceeding forecasts and reinforcing concerns that inflationary pressures remain more persistent than policymakers had hoped¹. Producer price inflation also moved sharply higher, reaching its strongest level in almost four years and adding to fears that higher input costs could continue to feed through into the broader economy. Against this backdrop, expectations for interest rates to remain elevated for longer strengthened further, weighing on growth stocks and prompting a rotation towards value-oriented areas of the market. As a result, many of the market's recent AI-driven winners came under pressure, while more defensive and economically dependent sectors proved relatively resilient.
Other AI-sensitive markets also struggled last week as investors reassessed growth expectations across the sector. The Nikkei 225 fell -5.4% (in yen terms), with several of Japan's most prominent AI beneficiaries among the largest decliners. Kioxia and SoftBank, both key participants in the broader AI value chain, each fell by more than -10.0% as the sell-off in technology and semiconductor-related stocks intensified. Elsewhere, the Shanghai Composite declined -2.6% (in renminbi terms), with losses heavily concentrated within the technology sector. While financial stocks provided some support, it was insufficient to offset broader weakness across growth-oriented areas of the market. By contrast, European equities proved considerably more resilient, helped in part by their lower exposure to the AI theme. The MSCI Europe ex UK Index gained +1.5% (in euro terms), with German equities performing particularly well. Similarly, the FTSE 100 advanced +3.3%, supported by its greater exposure to value-oriented sectors and a modest upside surprise in the latest UK GDP data, which helped improve sentiment towards the domestic economic outlook.
Macro Data
| Country | Indicator | Period | Actual | Forecast | Previous |
|---|---|---|---|---|---|
| UK | GDP MoM | August | 0.10% | -0.10% | 0.40% |
| Manufacturing Production YoY | August | 3.00% | 2.30% | 2.60% | |
| US | Consumer Price Index Inflation YoY | September | 3.70% | 3.60% | 3.40% |
| Existing Home Sales Annually Adjusted Units | September | 3.99m | 3.95m | 3.98m | |
| Retail Sales YoY | September | 6.30% | – | 6.00% | |
| Producer Price Index Inflation YoY | September | 6.30% | 5.30% | 5.40% | |
| Europe | Industrial Production YoY | August | -1.10% | -0.10% | 0.00% |
| Japan | N/A | – | – | – | – |
| China | Consumer Price Index Inflation YoY | September | 0.90% | 1.00% | 0.80% |
| Exports YoY | September | 36.30% | 25.50% | 25.00% | |
| Imports YoY | September | 31.00% | 24.50% | 28.20% | |
| Producer Price Index Inflation YoY | September | 5.00% | 4.50% | 3.80% | |
| Source: Refinitiv Workspace | |||||
¹ Bureau of Labor Statistics – Consumer Price Index Summary, September 2026