Euphoria on AI Deal Spree Dented by ISM Data: Markets Wrap

(Bloomberg) — US stocks touched record highs as Friday brought another round of big-ticket artificial intelligence deals and partnerships before a reading business activity chipped away at the gains.

The Nasdaq 100 struggled to hold onto early gains after setting an all-time high for the third-consecutive day at the open. A readout from the Institute for Supply Management weighed on the rally. It showed the US service sector stalled in September as business activity shrank for the first time since the pandemic and orders barely expanded.

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The S&P 500 rose 0.2%, setting the US benchmark on track for a sixth straight gain and its longest winning streak since July. The gauge has now gone 114 trading sessions without a 5% pullback, taking investors on a one-way march to all-time highs. Global Infrastructure Partners’ advanced talks to acquire Aligned Data Centers, a major beneficiary of the AI spending boom stoked fresh optimism. The deal could value the company at about $40 billion. In Asia, Japan’s Hitachi Ltd. teamed up with OpenAI on energy and related infrastructure, while Fujitsu Ltd. expanded its collaboration with Nvidia Corp.

“While it’s been very difficult to stand in front of this market, storm clouds are darkening, including the late-‘90s-like trends unfolding in tech/AI, a disconnect between Fed rhetoric and market expectations around easing,” writes Vital Knowledge’s Adam Crisafulli. Bears see investors as “very complacent about the shutdown, with most assuming it will be wrapped up in under two weeks, but there doesn’t seem to be substantive movement toward a compromise.”

Among signs that the market is getting frothy: a sentiment gauge compiled by Barclays Plc has been sitting near a level that indicates exuberance. A similar Bloomberg Intelligence measure is back to a “manic” zone that’s preceded lukewarm returns in the past.

Investors are wagering that the billions pouring into the AI sector will translate into profits and extend gains in tech shares. The rally underscores how bullish momentum is overshadowing concerns about a US government shutdown, now in its third day and prompting a blackout in key economic data.

“Financial market volatility is falling across the board, partly driven by the US government shutdown and the delay to key data releases such as the September jobs data,” wrote ING strategists Chris Turner and Francesco Pesole. “Instead, investors remain transfixed by the AI-driven rally in megacap tech shares, which shows no signs of slowing.”

Friday’s burst of new partnerships and potential deals came just a day after a share sale lifted OpenAI’s valuation to $500 billion. Stocks have climbed to successive record highs this year, with AI optimism adding to bullish momentum from prospects of monetary policy easing and resilient earnings.

US Treasury yields advanced after Federal Reserve Bank of Chicago President Austan Goolsbee reiterated his view that officials should proceed carefully with interest-rate cuts.

The benchmark 10-year which helps set a range of borrowing costs in the US rose nearly 2 basis points to 4.10%. Fed officials disagree about how much further to reduce borrowing costs after lowering their benchmark rate by a quarter percentage point last month. The temporary blackout in readouts during the US government shutdown threatens to further obscure the Fed’s next move, but swaps traders remain confident in another quarter-point cut in October.

In commodities, gold was on track for a seventh weekly gain, fueled by central bank buying amid falling US interest rates and lingering inflation concerns. And despite all the hype around AI and the surge in chip stocks this year, gold miners have actually been the better bet.

An MSCI Inc. gauge of global gold equities has soared about 135% in 2025. It’s on course for its biggest-ever outperformance against the index compiler’s measure of major semiconductor firms, which is up 40%.

In other corners of the market, oil headed for its biggest weekly decline since late June, ahead of an OPEC+ meeting that’s expected to result in the return of more idled barrels.

The continued optimism around AI is stoking questions over how far the rally can run. Concerns are growing that valuations look overheated as spending has yet to translate into earnings.

“The market may well start asking questions whether current valuation levels are justified,” said Wolf von Rotberg, equity strategist at Bank J. Safra Sarasin. “Further upside is set to be much more gradual, with risks of a setback fairly elevated.”

What Bloomberg Strategists say….

“Stocks can defy slowing labor-market fundamentals while speculators cover shorts, fund managers are underinvested and hedge funds are underperforming…Positioning is prime for now yet, as with valuations, when the collective penny drops that the economy is slowing, the price correction will be abrupt.”

— Simon White, Macro Strategist. For the full analysis, click here.

Corporate News:

Applied Materials Inc. shares dropped 2.9% after a $600 million hit to its 2026 revenue. Boeing Co.’s 777X is slated to fly commercially for the first time in early 2027 instead of next year, people familiar with the matter said, a fresh setback to the US planemaker that sets the stage for potentially billions of dollars in accounting charges. Huawei Technologies Co. used advanced components from Asia’s largest technology firms in at least some of its leading Ascend AI processors, a research firm discovered during teardowns. Some of the main moves in markets:

Stocks

The S&P 500 rose 0.2% as of 10:06 a.m. New York time The Nasdaq 100 was little changed The Dow Jones Industrial Average rose 0.5% The Stoxx Europe 600 rose 0.3% The MSCI World Index rose 0.3% Currencies

The Bloomberg Dollar Spot Index fell 0.1% The euro rose 0.3% to $1.1755 The British pound rose 0.2% to $1.3473 The Japanese yen was little changed at 147.22 per dollar Cryptocurrencies

Bitcoin fell 0.3% to $120,366.42 Ether fell 0.7% to $4,462.15 Bonds

The yield on 10-year Treasuries advanced two basis points to 4.10% Germany’s 10-year yield was little changed at 2.70% Britain’s 10-year yield declined two basis points to 4.69% Commodities

West Texas Intermediate crude rose 0.5% to $60.78 a barrel Spot gold rose 0.6% to $3,880.52 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu, Cecile Gutscher, Andre Janse van Vuuren, Levin Stamm and Alex Nicholson.

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