Positive impactResults
Why are US stocks rallying despite Fed rate shock? Aswath Damodaran explains in the context of AI
Economic Times 1 hr ago·9 Oct 2026, 9:27 am
US equity markets have continued to climb despite a significant jump in Treasury yields, a trend that seems counterintuitive to many investors. Aswath Damodaran, a renowned valuation expert, attributes this resilience to the strong narrative around Artificial Intelligence. The market is betting that AI will drive substantial earnings growth, which investors believe can outpace the drag caused by higher interest rates.
This rally is currently supported by a low equity risk premium, meaning investors are accepting lower returns for holding stocks. However, this optimism carries risk. If AI investments fail to generate the profits that the market expects, the current valuation levels may become unsustainable. Investors should closely monitor whether these high expectations are being met in upcoming earnings reports.
Key takeaways
- Category: Results.
- AI reads the tone as positive (potentially bullish) for the stock.
- Assessed as a significant, market-relevant update.
Why it matters
A meaningful update worth tracking. The tone is positive — historically associated with upward pressure, though not predictive. Use the price and stock snapshot to gauge how the market is responding.
