Oil Jumped. Yields Followed. AI Paid.

GOOD MORNING, September opened with macro back in control. Renewed U.S.-Iran fighting pushed oil sharply higher, global bond yields climbed to multi-year highs and the odds of another Fed hike jumped. The Nasdaq fell more than the Dow as higher discount rates hit long-duration growth hardest. But the AI spending cycle did not disappear with the selloff: after the close, Dell raised its full-year outlook again on record AI-server demand. That leaves investors with a familiar but increasingly expensive tension — AI earnings are still growing fast, but the rate used to value them is moving the wrong way.

MARKETS | TLDR

Wall Street started September in the red: The S&P 500 fell 0.71%, the Dow lost 0.79% and the Nasdaq dropped 1.03% as higher oil and bond yields pushed investors away from expensive growth stocks.
Treasury yields climbed toward fresh highs: The U.S. 10-year yield rose to about 4.79%, while bond yields in Japan, the U.K. and Europe also hit multi-year highs as markets priced stickier inflation and tighter policy.
Oil surged on renewed Middle East escalation: Brent rose to about $94.65 and WTI to $90.22 as renewed U.S. strikes on Iran and disruption around the Strait of Hormuz revived supply fears.

RATES

The Market Just Found Its September Problem

Stocks opened September under pressure as two macro forces moved in the same direction: oil prices jumped and global bond yields climbed. The S&P 500 lost 0.71%, the Dow fell 0.79% and the Nasdaq dropped 1.03%. The U.S. 10-year Treasury yield moved toward 4.79%, its highest area since early 2025, while yields in Japan, Britain and Germany also reached levels not seen in years.

The connection matters more than either move alone. Higher oil raises the risk that inflation stays sticky; higher inflation increases the chance that central banks keep rates restrictive or tighten further; and higher long-term yields reduce the present value of future earnings. That chain is especially painful for the Nasdaq and AI-linked growth stocks, where valuations depend heavily on profits expected years from now. Markets lifted the probability of a 25-basis-point Fed hike in September to roughly two-thirds, up sharply from a week earlier.

The pressure is not purely a Fed story. Investors are also demanding more compensation to absorb heavy government borrowing, while Japan, the U.K. and Europe are dealing with their own fiscal and inflation concerns. That makes the current bond selloff harder for equities to dismiss as a temporary policy repricing. Even if oil cools, a structurally higher cost of capital can remain.

AI SERVERS

Dell’s AI Orders Are Still Outrunning the Rates Trade

Dell raised its full-year outlook again after the close as demand for AI servers continued to surge. The company lifted its annual revenue forecast by $25 billion to $192 billion and raised its adjusted earnings-per-share outlook to $25.50 from $17.90. It has received more than $130 billion of AI-server orders over the past year and now expects fiscal 2027 AI-optimized server revenue of about $74 billion, up from a prior $60 billion forecast.

That matters because Dell sits downstream from the headline chip trade. Its systems package Nvidia GPUs, networking, storage and enterprise infrastructure into something customers can actually deploy. Record server orders therefore provide evidence that the AI capex cycle is turning into physical data-center buildout rather than remaining only a semiconductor forecast. Dell’s second-quarter revenue rose 58% to $47 billion, while server and networking sales nearly doubled.

The tension is valuation rather than demand. Dell shares rose about 7% after hours, but Tuesday’s broader market showed what happens when the discount rate rises faster than earnings expectations. AI infrastructure can keep producing exceptional revenue growth and still face multiple compression if Treasury yields stay near 5%. For investors, the question is becoming less “Is AI spending real?” and more “How much growth is enough to beat the cost of capital?”

HEADLINES

Tim Cook is handing Apple to John Ternus: Cook moves to executive chairman after building Apple into a roughly $4.5 trillion company; Ternus inherits a much richer business but also the pressure to close Apple’s gap in generative AI.
SB Energy filed for a U.S. IPO as AI infrastructure demand surges: The SoftBank-backed developer reported a $439 billion project backlog despite having no operating data centers yet, showing how aggressively public markets are being asked to finance the AI buildout.
Energy was the only S&P sector to finish higher: The move showed how quickly the same oil shock can create winners in producers while acting as an inflation tax on the rest of the equity market.
Global manufacturing held up better than the bond market suggested: Factory activity improved in parts of Asia and Europe, helped in part by AI-hardware demand, even as U.S. manufacturing remained softer.
Shein struggled in its Hong Kong debut: The weak reception highlighted how public-market investors are still demanding discounts from high-profile growth businesses that cannot offer the earnings visibility of the AI infrastructure leaders.

UPCOMING

Fed Beige Book — September 2: The Fed’s regional survey will show whether higher energy costs, AI-related investment and tighter financing conditions are already changing business activity.
Christopher Waller speaks — September 3: Investors will listen for whether Waller supports the more hawkish September rate expectations now embedded in markets.
U.S. jobs report — September 4: August payrolls will test whether labor-market cooling is strong enough to restrain the Fed as inflation risk rises again.
FOMC — September 15-16: The next policy meeting now carries renewed hike risk, with both employment and inflation data still due before the decision.

DEEP INSIGTHS

Not Just Nvidia: The Power and Cooling Firms Riding the Data-Center Boom

Read this to understand where the AI capex cycle goes after chips. Power equipment, transformers, cooling systems and grid infrastructure are becoming critical bottlenecks as data-center construction accelerates. McKinsey estimates global data-center investment could approach $7 trillion by 2030, creating another layer of winners — and another layer of capital intensity — around the AI trade.

Kevin Warsh: In Our Time

Warsh’s Jackson Hole speech is useful context for why markets are reacting so strongly to rates. He argues that unusually strong investment, including AI infrastructure, may be lifting the economy’s productive capacity while also changing the balance of capital demand. That leaves the Fed trying to distinguish productive growth from inflationary overheating — exactly the tension now showing up in oil, bond yields and tech valuations.