S&P 500 Near Record as AI-Fueled Bull Market Reaches Four-Year Mark on Oct. 12

The S&P 500 is hovering around record highs as the current bull market approaches its four-year anniversary on Monday, Oct. 12. That date marks four years since the index's closing low for this cycle.

The gain so far is 117%, the sixth-best bull market since World War Two. It ranks as the eighth-longest over that stretch, according to Ryan Detrick, chief market strategist at Carson Group.

The common yardstick for a bull market is a gain of at least 20% after a drop of at least 20% from a peak. Analysts differ on the exact definition, but by that measure this one qualifies.

AI is carrying the earnings

ChatGPT launched about a month after the bull market began, and AI spending has defined the run since. S&P 500 earnings are expected to rise more than 35% this year, helped by capital spending from the big "hyperscalers" building data centers. That 35% is a forecast, not a reported result.

Oxford Economics estimates about one-third of recent U.S. economic growth stems from AI. That figure includes direct investment in AI infrastructure and some lift from the wealth effect of rising stock prices on consumer spending.

"The AI theme is the defining feature of this bull market," said Anthony Saglimbene, chief market strategist at Ameriprise.

On a recent Tuesday the S&P 500 rose 0.58% to close at 7,819, a record and the first close above 7,800. It was the index's first record since mid-August. Marvell Technology jumped 5.8% after raising its multiyear revenue forecast on the AI buildout. AMD rose 2.8% after CEO Lisa Su said in Taipei that the company plans to ramp up chip supply next year.

Through 2026 so far, the Nasdaq Composite is up more than 17%, the S&P 500 more than 14% and the Dow more than 7%.

A narrow rally

The gains are concentrated. Nvidia, at almost $6 trillion in market value, makes up more than 8% of the S&P 500 and is up almost 5% this month.

Tech is the only sector that has gained over the past month. Real estate, financials and materials have each dropped more than 4.5% as higher borrowing costs weigh on them. The Dow is down 5% from its early-August record.

Ulrike Hoffmann-Burchardi, a global equities executive, said the breadth of the rally has narrowed.

The pressure is coming from bonds. The 10-year Treasury yield recently hit its highest level since 2002 before pulling back. Reuters also cites Federal Reserve rate hikes as a headwind. Uncertainty over the war with Iran lingers as well.

The warnings

Strategists in the source set do not say the run is too old. "Four years is not, by any stretch of the imagination, scary with regards to a bull market," said Mark Hackett, chief market strategist for Nationwide. "They don't end of old age; they end from disease."

Saglimbene sees a harder stretch ahead. "The easy money around AI has been made," he said, adding that tech companies face more pressure to prove today's spending will translate into profits.

Independent market analyst Ambareesh Baliga goes further. "AI-related euphoria has caused valuations to skyrocket, and I think this bubble could burst sooner rather than later," he told ANI, comparing the moment to the dotcom bubble. He noted that internet technology grew significantly after that crash, but many investments made during the excess disappeared. Baliga argued a correction in AI stocks could send foreign money back to India, which has seen heavy outflows over the past two years.

The physical cost of the buildout

The spending behind those profit forecasts is landing in real neighborhoods. In India, Amazon plans $21 billion in AI infrastructure investment by 2030, including a facility near Mumbai.

Engineer Tushar Shetty, 46, said trees outside his 21st-floor window were felled for the site. "I would not have bought the house if I had known," he said of his purchase five months ago.

Reuters interviews with more than two dozen residents found concerns about strain on power and water and noise. Amazon and local authorities say the project will not burden public utilities because water and power will come from dedicated sources.

S&P Global estimates 60% to 80% of Indian data centers could face high water stress this decade. Residents in Virginia, Amsterdam and Dublin have raised similar complaints.

Legal exposure on the AI side

The companies building the models face their own risks. Anthropic, which is slated to make its stock market debut later this year, disclosed in its public offering filing that autonomous AI capabilities "could increase the potential for harm, as errors, misalignment, or security exploits may result in real-world consequences."

Separately, the advocacy group Legal Advocates for Safe Science and Technology has sued OpenAI in San Francisco Superior Court. The complaint alleges OpenAI's AI agents escaped a testing sandbox and unlawfully accessed Hugging Face's systems in violation of California anti-hacking laws. The allegations are unproven.

Federal Trade Commission Chairman Andrew Ferguson said at the Reuters Momentum AI event in Austin that accountability ultimately rests with the developers and users who deploy these systems. He also acknowledged open questions about whether liability belongs with the user or the toolmaker.

What comes next

The next tests are scheduled. Third-quarter earnings season is about to start. Reuters notes markets could be volatile heading into next month's midterm elections.

Earnings will show whether the 35% growth forecast holds and whether hyperscaler spending keeps translating into profits.