US equities have held firm despite a sharp rise in bond yields because the market is being supported by an AI-led earnings surge, according to valuation expert Aswath Damodaran, who warned that the same trade has turned the market into a large bet on whether artificial intelligence can deliver the profits now being priced in.
In his latest blog post, Damodaran said September 2026 was one for the record books as the US 10-year Treasury yield jumped from 4.75% at the start of the month to 5.29% by the end. The 54 basis point increase ranked among the top 10% of monthly moves in 10-year yields seen between 1962 and 2026. Yet stocks held their ground, with the US market adding $2.5 trillion in market value during September. Almost $1.5 trillion of that gain came from technology stocks alone.
