S&P 500 Drops in 56% of Septembers Since 1928: Implications for AI Stocks

Key Takeaways

The “September Effect” typically sees the S&P 500 decline in over half of the months since 1928, averaging a loss of 1.17%.
Psychological factors and seasonal strategies contribute to market pullbacks in September, but nearly half the time, the S&P 500 has risen during this month.
Despite potential market declines, leading AI stocks like Nvidia and Micron are worth holding onto due to their strong growth forecasts and market positions.

The September Effect on Markets

The approaching month of September raises concerns for investors due to the “September Effect.” Bank of America research indicates that historically, the market has a 56% chance of decline during this month, with the S&P 500 averaging a decline of about 1.17%. Even stocks in high-demand sectors, such as artificial intelligence (AI), may feel the impact.

Investor psychology plays a crucial role in this trend. Following several underperforming Septembers, many investors anticipate declines, leading them to sell and further exacerbate the situation. Additionally, investors often take profits or engage in tax-loss harvesting as the fiscal year closes. Economic shifts, particularly decisions by the Federal Reserve regarding interest rates, can further influence market behavior. Currently, rising inflation is prompting increased scrutiny ahead of the Fed’s September meeting.

While the historical data suggests declines, the reality remains that the S&P 500 has also recorded gains in nearly half of all Septembers since 1928.

The Outlook for Nvidia and Micron

If a market pullback occurs, AI stocks such as Nvidia and Micron could experience a downward shift. However, both companies remain attractive investment opportunities. Nvidia reported remarkable fiscal second-quarter results for 2027, with revenues more than doubling to $96.2 billion and earnings rising 120% to $2.22 per share, significantly exceeding analyst expectations. Nvidia’s management is optimistic regarding a strong revenue increase for fiscal 2028, predicting a 70% growth rate compared to a 44% analyst estimate.

Micron’s fiscal fourth-quarter results are highly anticipated, set for September 23, with management targeting $50 billion in revenue and $31 per share in earnings, marking substantial growth. Both companies lead in the AI infrastructure market, with Nvidia commanding an 86% share of data center GPUs and Micron holding a 22% share in global DRAM memory.

Tech companies are projected to invest $1.3 trillion in AI data centers next year, which should benefit both Nvidia and Micron. Should share prices dip in September, this would present a valuable buying opportunity for astute investors. In light of the September Effect, investors are encouraged to maintain their positions in these high-potential stocks and view any market fluctuations as potential advantages.

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