S&P 500 Gains 0.4% on Enterprise AI Spending

The S&P 500 will close up 0.4% tomorrow, largely on the back of sustained enterprise investment in artificial intelligence. Corporations continue to allocate significant capital to AI transformation, translating directly into robust demand for chips, software, and cloud computing services. This underlying current of technology spending remains the dominant force in market direction, even as macroeconomic data points like the August Producer Price Index (PPI) are released.

Technology leaders like Nvidia (NVDA) are direct beneficiaries of this trend. We expect Nvidia (NVDA) to close up at least 1.5% tomorrow. The ongoing build-out of AI data centers by major cloud providers drives persistent demand for Nvidia's (NVDA) graphics processing units. This fundamental tailwind is not a fleeting trend but a multi-year investment cycle, positioning Nvidia (NVDA) for continued outperformance. Its moves typically provide significant upward momentum for the broader Nasdaq 100, which we expect to gain 0.6%.

Enterprise software providers are also seeing direct benefits. Microsoft (MSFT), for instance, continues to integrate AI across its product suite, from Azure cloud services to Copilot in its productivity applications. We anticipate Microsoft (MSFT) will rise at least 0.8% tomorrow. This growth highlights healthy corporate IT budgets and a willingness to invest in efficiency gains through AI. Similarly, Amazon Web Services (AWS), a key component of Amazon's (AMZN) revenue, is experiencing surging demand for AI-related compute. We forecast Amazon (AMZN) shares will climb at least 1.0%.

While the August PPI report at 8:30 AM ET will garner attention, its influence on the broader market trend will likely be limited. We see a 40% chance of an upside surprise in the core PPI, indicating persistent, but contained, inflation. Should core PPI print hotter than the consensus of +0.2% month-over-month, it could lead to a temporary tick higher in the 10-Year Treasury yield, which we expect to rise 0.7 basis points. However, the corporate earnings picture, particularly in technology, remains compelling enough to override minor inflation concerns for tomorrow's session. The market has proven resilient to moderate shifts in rate expectations when corporate growth remains strong.

Our bullish thesis would falter if the August core PPI report came in significantly hotter than expected, perhaps above +0.4% month-over-month, paired with unexpected negative commentary from a major tech company regarding AI spending plans. Such a combination could trigger a broader sell-off, signaling a breakdown in the core growth narrative and a more aggressive Federal Reserve stance.