AI linked mega caps help support stock indexes despite higher rates

In short: A New York Times columnist says excitement about AI has helped keep major stock indexes up, even as higher interest rates weigh on the wider market.

What's going on

Stock markets have been pulled in two directions. Optimism about artificial intelligence, meaning expectations that AI will boost company profits, has supported share prices for some big companies. At the same time, higher interest rates have made it harder for many stocks to rise.

A related market commentary cited by the columnist argued that a small group of very large, AI linked companies has done much of the heavy lifting for the major indexes. It named Alphabet, Meta, Apple, AMD, Dell, Eli Lilly, and Visa as stocks that were strong enough to help hold indexes up. Meanwhile, hundreds of other stocks were weak, and many were hitting new lows.

This can happen because major indexes give more weight to the biggest companies. It is like a class average where a few students with very high scores can hide the fact that many others are failing.

Higher rates still matter. When interest rates rise, bonds can look more attractive than stocks, and companies often pay more to borrow money. Investors also tend to value future profits less when rates are high, similar to how a dollar promised years from now feels worth less than a dollar today.

What to watch

The columnist’s argument is an interpretation, not proof of cause and effect. If AI related companies miss earnings expectations or slow spending, the same small group that has been supporting indexes could also pull them down quickly. Investors will also keep watching the 10 year US Treasury yield, which rose above 5% in September 2026, because higher yields can keep pressure on stock prices.

Source: NYTimes