New AI rally, an upgrade for UK stocks and a FTSE 100 forecast
A resumption of the AI trade has lit a fuse under popular American tech stocks, while one City analyst explains where they think the UK blue-chip index will finish the year.
22nd September 2026 13:13
by Graeme Evans from interactive investor
A fresh dose of AI optimism meant Wall Street's Nasdaq Composite has broken records and Meta Platforms Inc Class A (NASDAQ:META) is riding high after an 11% overnight jump.
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Last night's 2.3% Nasdaq surge was accompanied by an all-time peak for the Magnificent Seven of megacap stocks and 1.4% advance for the S&P 500 index in its best show in seven weeks.
Risk appetite was boosted by the rapid take–up of Meta's new personal AI agent Muse, which has recorded more than 2.5 million downloads across iOS and Android in its first 13 days.
UBS Global Wealth Management said the figures provided early evidence that consumer AI agents could offer new AI monetisation opportunities beyond enterprise applications.
The bank told clients: “We note that the pipeline of competing products suggests an increasingly competitive space, but rising consumer usage overall should continue to underpin demand for computing power and AI infrastructure.
“This should benefit high-quality semiconductor and hardware leaders, including Asia’s AI supply chain.”
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Other landmarks in yesterday's strong Wall Street session included the $1 trillion valuation of chipmaker Advanced Micro Devices Inc (NASDAQ:AMD), whose shares rose 10% on a day when the Philadelphia Semiconductor Index added 4.3%.
The resumption of the AI trade was further helped by an easing of interest rate worries after the price of Brent crude fell back beneath $100 a barrel for the first time in nine sessions.
Deutsche Bank said: “Despite September’s reputation as one of the worst of the year for markets, the latest moves actually leave the S&P 500 back in positive territory for the month and within half a percent of its all-time high.”
Elsewhere, the 10-year US Treasury yield dropped yesterday by 4.5 basis points to 4.95% and the price of bitcoin moved back above $85,000 for the first time since January.
The FTSE 100 index closed 0.75% higher and consolidated those gains in today's session after the oil price fall helped Rolls-Royce Holdings (LSE:RR.) rise 4% and British Airways owner International Consolidated Airlines Group SA (LSE:IAG) by 3%. Raspberry Pi Holdings (LSE:RPI) yesterday surged by 8% at the top of the FTSE 250 index.
The renewed appetite for technology stocks follows last week's jitters caused by the first Federal Reserve interest rate hike since 2023.
UBS added today: “This environment may appear negative for equities, particularly for longer-duration growth companies, which can face valuation pressure from higher yields and increased funding costs.
“But rates alone do not determine market performance. With economic growth resilient and earnings still robust, we believe investors should remain positioned for market upside. In our view, exposure to transformational innovation could be a key differentiator in long-term equity performance.”
The bank said on Friday it continues to hold an Attractive recommendation on global equities, noting that previous starts to Fed hiking cycles were not usually followed by a more challenging period for stocks.
It adds that Nasdaq 100 companies are forecast to grow their earnings by 43% this year and 28% next year, while hyperscalers’ cloud revenue growth is also accelerating.
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UBS said: “We believe their expected returns remain comfortably above funding costs, and expect AI-related cap expenditure to grow further to $1.2 trillion in 2027.”
The bank continues to favour high-quality semiconductor and hardware leaders that benefit from AI infrastructure investment.
“We believe the largest AI capex spenders should provide resilience across a range of outcomes given their scale, diversified earnings streams, and growing AI monetization opportunities.
“Select infrastructure software and defensive tech companies should also offer opportunities.”
On Friday, the bank upgraded the UK market's absolute outlook to Attractive but said that growth may not be as robust as in other regions.
It described the UK's valuation as reasonable based on a multiple of 12.4 times forward earnings, which compares with the median since 1990 of 12.8 times.
The bank forecast profits growth of 16% this year but slowing to 9% in 2027 as commodity price tailwinds fade. Its central scenario points to the FTSE 100 index ending 2026 at 11,200 and reaching 11,500 by June, which represents 7% upside on today's level of 10,755.
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