Schwab’s Kevin Gordon says the S&P 500 sits 1% below its high, yet the average stock had a 14% drawdown. He says AI stocks carry the index, so one capex miss, a shortfall in AI capital spending, could disrupt earnings.

However, that 14% is the average peak-to-trough drop among S&P 500 members since early August, not their loss today. The index weights companies by market value, so the largest stocks dominate its moves.

Why Is AI Carrying a Market That Looks Weak Underneath?

Kevin Gordon, Schwab’s head of macro research and strategy, spoke on Bloomberg This Weekend.

Tech sat out much of the summer rally, he said, but AI-related stocks now hold up the market. Valuation worries and public pushback against AI are beginning to fade, he added.

Similarly, Big Short investor Steve Eisman said in July that the whole market has become one AI bet.

What Happens if Mega-Caps Post a Capex Miss?

Gordon said one miss, paired with pared-back budgets, is where earnings disruption could begin. He relayed a line he said he could not claim as his own.

“it’s no longer earning season, it’s CapEx season.”

Kevin Gordon, via Bloomberg

Meanwhile, FactSet projects 32.4% S&P 500 earnings growth for 2026, up from about 15% at the start of the year.

Apollo Global Management chief economist Torsten Slok issued an AI debt warning last month. He said the cost of insuring cloud giants’ debt against default signals risk in debt-funded AI spending.

In contrast, Gordon said Federal Reserve hikes at roughly every other meeting would be the best case for stocks. Such a pace would not aim to slow growth sharply or hit the labor market.

Still, the index now rests on a few spending budgets, while the average stock has already taken a double-digit hit. Third-quarter earnings season, which opens this month, will show whether those budgets hold.

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