Stock Market Overview

In the final weeks of August, stocks rebounded, bringing the S&P 500 close to its all-time high as September approached. However, significant changes have occurred beneath the surface since July.

The leading stocks, known as the Magnificent Seven, previously dominating the market, have struggled to recover from recent declines. This shift in their performance is a significant indicator of the changing market dynamics. The favored investment trend of the year—betting on significant tech stocks—has weakened as investors have shifted their focus to dividend-paying and rate-sensitive stocks, anticipating interest rate cuts by the Federal Reserve.

As the Fed is anticipated to implement rate cuts in September, the market is poised for significant changes. The key questions on everyone’s mind are: How substantial will these rate cuts be? And can the AI investment trend regain its lost momentum?

Here are five stocks to watch in September that might influence market trends or experience significant price movements:

Nvidia

Nvidia (NVDA) reported strong quarterly earnings on Wednesday, but the results fell short of investors’ high expectations.

The market’s lukewarm reaction to Nvidia’s earnings reflects growing concerns about the tech sector’s AI investments and Nvidia’s sharp rise. Major tech companies like Microsoft (MSFT), Alphabet (GOOG; GOOGL), Amazon (AMZN), and Meta (META) collectively spent $58.5 billion on infrastructure in Q2, primarily for AI data centers. This hefty spending has raised doubts among Wall Street about the wisdom of such investments. Despite benefiting from this spending, Nvidia has been affected by these concerns.

After a prolonged rally, Nvidia is now held to a higher standard than most companies. The company forecasted current-quarter revenue of $32.5 billion, slightly above Wall Street’s consensus but lower than previous quarters when Nvidia frequently exceeded expectations by larger margins.

Nvidia’s performance in September will likely hinge on whether skepticism about AI’s returns persists or fades.

Apple

Apple (AAPL) is anticipated to unveil its new AI-enabled iPhone 16 on September 9 at its Cupertino headquarters.

The company had a challenging start to the year, with its stock falling about 11% in Q1 due to concerns over sluggish iPhone sales and its AI strategy. However, shares have since rebounded following the introduction of Apple Intelligence, its proprietary AI system, in June.

Apple Intelligence is expected to trigger a significant upgrade cycle, with many iPhone users likely to trade in their old models for newer, more expensive ones. Analysts at Wedbush estimate that 300 million iPhone users have not upgraded in over four years, potentially leading to sales of up to 240 million iPhones in fiscal 2025.

The upcoming product launch is not just another event for Apple. It’s a crucial opportunity to generate excitement about Apple Intelligence before the critical holiday shopping season, and it’s a moment that investors and analysts will be watching closely.

Alphabet

Alphabet (GOOG; GOOGL), Google’s parent company, faces its second antitrust trial in September as it battles the Department of Justice (DOJ).

In January, the DOJ and eight states filed a lawsuit accusing Google of monopolizing the digital advertising technology market. The DOJ’s proposed remedy includes forcing Google to divest its ad tech business.

The trial, overseen by U.S. District Judge Leonie Brinkema, will start on September 9. Although a ruling is not expected by the end of September, the prosecution may uncover negative information that could significantly affect Alphabet’s stock.

Investors will hope for a more favorable outcome than the previous case, in which a federal judge ruled in early August that Google had illegally monopolized the online search market. A hearing for potential remedies is scheduled for September 6, and the possibility of breaking up Google is being discussed. Alphabet plans to appeal this ruling.

Broadcom

Broadcom (AVGO), a major semiconductor company, will report its quarterly earnings after market close on September 5, which could test its impressive year-to-date gains.

Broadcom’s stock has risen 46% this year, outpacing the PHLX Semiconductor Index (SOX), which has increased 24%. The stock has benefited from enthusiasm for AI, though not as much as Nvidia, which has gained 141% this year.

JPMorgan analysts noted that Broadcom recently added two significant AI chip customers to its roster: Google, Meta, and ByteDance. Reports suggest that OpenAI, known for ChatGPT and backed by Microsoft, could be among these new clients.

Investors will seek confirmation of new customers in Broadcom’s earnings report, which could support bullish forecasts despite growing scrutiny of AI stocks.

Kroger

The fate of the $25 billion merger between Kroger (KR) and Albertsons (ACI) could be decided in federal court in September.

The merger, announced in October 2022, is under a three-week federal hearing in Portland, Oregon, where it faces an antitrust lawsuit from the Federal Trade Commission (FTC) and several states.

The FTC argues that the merger would reduce competition and increase grocery prices. At the same time, Kroger and Albertsons claim it will lower prices and enhance their ability to compete with larger rivals like Walmart (WMT), Costco (COST), and Amazon (AMZN).

The FTC has requested a temporary injunction to delay the merger, allowing an FTC administrative judge to hear the case in separate proceedings scheduled tentatively for October 1.

Kroger’s legal team has warned that a granted injunction could lead to the expiration of financing agreements, potentially derailing the merger. In response, Kroger filed a lawsuit against the FTC in mid-August, challenging the constitutionality of the FTC’s in-house tribunal system.