Is Wall Street heading for third boom year in a row?
As a narrow band of tech stocks lead Wall Street to another record high, 2025 is starting to look a lot like 2023 and 2024. City writer Graeme Evans discusses whether the S&P500 can maintain momentum.
23rd September 2025 13:41
by Graeme Evans from interactive investor
A narrow band of tech giants led by NVIDIA Corp (NASDAQ:NVDA) has turned Wall Street’s September form book on its head by driving the S&P 500 index to its 28th record close of the year.
The US benchmark opened today’s session 3.6% higher so far this month, representing a sharp contrast to September’s record as the worst performing month of the past decade.
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Fresh momentum for the AI trade after Nvidia signed a strategic deal with OpenAI, helping the chip giant to close last night at a record $183.61, giving a market valuation of $4.46 trillion.
Nvidia shares are a third higher year to date, while similar performances by Microsoft Corp (NASDAQ:MSFT), Meta Platforms Inc Class A (NASDAQ:META) and Alphabet Inc Class A (NASDAQ:GOOGL) have lifted the Magnificent Seven by 20.4% so far in 2025.
Their performances, alongside a recent upturn for Tesla Inc (NASDAQ:TSLA), Apple Inc (NASDAQ:AAPL) and Amazon.com Inc (NASDAQ:AMZN), mean the rise of the S&P 500 index since April’s post-tariffs volatility now stands at 34%.
Deutsche Bank said the profile of US equity performance is looking very much like 2023 (+24.2%) and 2024 (+23.3%) again, where the annual gains are being driven by a very narrow group of stocks.
It points out that the S&P 500 is now up 13.8% so far this year, whereas the equal-weighted version is only up 7.65%.
The bank said: “Or in other words, it’s been the Magnificent 7 driving the gains, and most of the index has seen a steady, but not spectacular performance this year.”
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The S&P 500 index hit 6,666 during trading on Friday, a symbolic figure given that the low for the benchmark during the Global Financial Crisis in March 2009 was 666.
The past week’s run of three consecutive records means the index is nearing 1,200 all-time highs since 1964, representing about 7% of trading days over that period.
Whilst it can be tempting to assume the risks are to the downside following a record run, Capital Economics points out that 12-month inflation-adjusted returns since 1964 are slightly stronger compared to the average day.
The consultancy adds: “All-time highs in the S&P 500 and years of strong gains don’t mean the index is set to run out of steam.
“Rather than the level or momentum of the market, history suggests that returns from here will depend on what happens to Federal Reserve policy, US economic growth and enthusiasm over a transformative technology (AI).”
It believes that the rally in AI-related stocks has room to run, having recently forecast that the S&P 500 index will finish next year at 7,250.
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UBS Global Wealth Management maintains a high conviction in the structural growth story of AI.
It said today: “While current tech valuations are high, we believe the long-term potential for AI to drive performance remains strong.
“We maintain a balanced positioning across semiconductors, software, and internet industries, and view any market dips as compelling entry points for long-term investors.”
The bank’s equity team has a price target for Nvidia shares of $205, having reviewed yesterday’s plans to invest $100 billion in OpenAI and supply it with leading edge data centre chips.
UBS said: “For Nvidia this helps to flesh out multi-year visibility to the substantial growth headroom it laid out in the last earnings call, when it highlighted a $3-4 trillion total addressable market by 2030 (of which Nvidia’s share has been about 30-35%).”
Nvidia’s popularity among retail investors remains undiminished, ranking as the most bought US stock on the ii platform so far this month and across the year to date. The next most popular is Tesla, with its shares 7% higher year-to-date and 95% above their April low.
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