Catenaa, Thursday, October 01, 2026- Tech-exposed stocks within the S&P 500 rose by 14% between the end of July and mid-September, with a concentration in market returns.
According to Deutsche Bank, from late July to mid-September, tech-exposed stocks within the S&P 500 rose 14% while the remainder declined 3%. This divergence highlights how market returns are concentrated in the tech-exposed sector.
“In late July, our strategists anticipated a rotation back into technology, which remains underway,” the bank said.
Moreover, it said that Microsoft led the Magnificent Seven group in Q3 after its Azure growth materially exceeded expectations, with strong Copilot adoption and guidance for continued positive free cash flow despite substantial capital spending.
“Meta also became a major focus in Sep following the launch of Muse. Amazon’s AWS growth also accelerated, underscoring continued cloud demand. Tesla underperformed and remains the group’s worst-performing stock YTD,” Deutsche Bank said in a note to clients.
On July 30, Microsoft rose more than 15%, its strongest daily gain since 2008, following results released the previous evening. The move added ~$450 billion to its market cap, the largest one-day increase on record at the time.
Deutsche Bank also said chip stocks were initially hurt by a reversal of the AI trade and later by rising bond yields in the quarter.
The Philly SOX index fell sharply in Q3, after its worst monthly performance in July (-21%) since 2008.
The report said that concerns about higher oil prices and rising rates continued to weigh on the sector in August and September.
The note said that SK Hynix was among the weakest performers, amid an earnings disappointment relative to expectations and an unwinding of leveraged positions.
“Despite these headwinds, the semis outlook remains supported by AI infrastructure demand,” the note said.
Despite macro headwinds in the previous quarter, Deutsche Bank said that company guidance continued to indicate strong AI infrastructure demand, with Micron’s stronger-than-expected revenue guidance on September 30 providing further evidence of robust demand for memory chips.
It said that memory supply remains tight, semiconductor capex is accelerating, and the industry’s attention has increasingly turned to bottlenecks in optical networking and photonics, as well as concerns around AI regulation and safety
“Looking ahead, tech is likely to remain an important driver of equity returns into Q4, although elevated valuations and tighter financial conditions leave the sector sensitive to earnings disappointments,” Deutsche Bank said.
