Niles Investment Management founder Dan Niles predicts that Microsoft, Apple and Google will ultimately dominate the competitive artificial intelligence market. He outlines how these major tech giants will win.
Investors have survived September, the historically worst month of the year for stock market returns.
Outside of February (which has an average return that’s just barely negative), September is the only month to average a negative return for the S&P 500. The S&P 500 was actually positive for September this year, although it wasn’t a very large positive gain – less than 1%. However, that primes the market for October.
The S&P 500 has averaged about a 0.9% positive return in October, making it one of the better months (although not as good as November or December). I think there’s a huge opportunity coming in October, and it could send the market skyrocketing.
October has some major catalysts coming
October is the start of the fourth quarter, which means companies will start to report their third-quarter results. There are some highly anticipated Q3 earnings reports coming out soon, including many of the AI hyperscalers. We’ll get updated on how businesses like Alphabet, Amazon and Microsoft are doing in the second half of the month, and what they say could shape how the market performs through the end of 2026.
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| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| GOOGL | ALPHABET INC. | 338.24 | -5.84 | -1.70% |
| AMZN | AMAZON.COM INC. | 248.23 | -0.92 | -0.37% |
| MSFT | MICROSOFT CORP. | 512.80 | -0.10 | -0.02% |
These three tech megacaps are spending hundreds of billions of dollars to build new AI computing capacity in data centers. So far, the growth rates their respective cloud computing businesses have put up have made these investments worth it. This trio may decide to use their next earnings reports to reveal 2027 capital expenditure guidance, which could cause the markets to decline or soar based on the extent to which these three are planning on spending.
It’s already widely assumed that these three will increase their capital expenditures in 2027, but the question remains as to how much. I think they will make hefty hikes to their capex budgets, but that they will justify that spending by reporting further massive revenue growth from their cloud computing divisions.
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The opening bell of the New York Stock Exchange in New York City, on 28 May 2025. (Adam Gray for Fox News Digital)
Take Alphabet’s Google Cloud, for example. In Q2, its revenue rose 82% year over year, and it delivered a 36% operating margin. That’s an incredible business, and if Alphabet has customer demand for more capacity (which it does), it should be commended for heavily investing in this business unit.
I expect Amazon and Microsoft to say the same thing, which could send their shares skyrocketing. This would also have positive implications for chip providers like Nvidia, Taiwan Semiconductor Manufacturing, and Broadcom, which also make up a hefty portion of the value of the stock market.
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If the giant tech companies that account for more than a third of the value of the S&P 500 perform well, they should pull the rest of the market up with them and make October 2026 a fantastic month on Wall Street.
Keithen Drury has positions in Alphabet, Amazon, Broadcom, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Alphabet, Amazon, Broadcom, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
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