S&P 500 Equal-Weight Index Posts Record October Reversal as AI Trade Stumbles

The S&P 500 equal-weight index has outperformed the cap-weighted benchmark by 4.1 percentage points in October through Tuesday, reversing a 4.5-point September lag and marking the largest such swing on record for the average index constituent, as the AI trade lost momentum. Chip stocks, the core of the AI investment boom, fell far more sharply than the tech-heavy Nasdaq Composite, which was down just 1.4% this month through Tuesday. Nvidia (NVDA), Alphabet (GOOGL) and Meta Platforms (META) all suffered steep declines, and the Philadelphia Semiconductor Index has dropped more than 10% in October. Investors are growing concerned that rising borrowing costs could curb AI spending after bond prices issued by neoclouds such as CoreWeave (CRWV) fell. "People are starting to worry the bond market is actually sending a message — that you can't finance AI this way," said Ayako Yoshioka, senior investment strategist at Wealth Enhancement. Defensive sectors including consumer staples and health care, along with software stocks, drew buyers. Anthropic's pre-IPO financial disclosure on Monday appeared to ease some anxiety, lifting the Nasdaq for a second straight session on Tuesday.