MS Savone Global Reflections 5 Sep 2026

MS Nick Savone - Global Reflections 5 Sep 2026 Nick Savone · Morgan Stanley · IED / Sales commentary 5 Sep 2026

Sales commentary only (not a product of research). For institutional client use only.

The week before Labor Day usually has a reputation for being one of the quieter stretches on the calendar, but anyone watching the US Open knows that even the matches that look straightforward on paper can produce a few unexpected rallies. Between earnings still trickling in, payrolls adding to the debate around the Fed’s next move, AI capex financing adding to an already crowded bond market and renewed Middle East tensions, markets have been anything but sleepy. Arthur Ashe hasn’t been the only place where investors have had to keep their eye on the ball! US equities started September on softer footing, as higher yields challenged some of the year’s familiar winners even as another round of strong AI Infrastructure results suggested there were still plenty of good shots being played underneath. The policy backdrop has also stayed in focus, with power and data-center development increasingly entering the conversation ahead of the midterms and adding another consideration to an AI investment cycle that has hardly lacked them. While there are plenty of reasons to expect a tougher set from here, this market has indubitably spent most of the year finding answers when challenged…

In the micro, the top seeds in the US largely held their ground this week, with AI Infrastructure continuing to deliver while Software quietly found its way back into the match. Dell (DELL) was one of the cleaner shots, rallying after another strong quarter as AI server demand continued to fire on all cylinders and visibility into FY27 improved. The strength extended across the AI infrastructure stack, with Hewlett Packard Enterprise (HPE) lifting guidance on surging AI server and networking demand, while Broadcom (AVGO) pointed to AI chip sales potentially doubling over the next two years. But the better comeback story may have been playing out in Software: large-cap application SaaS has lagged the S&P 500 over the past year, yet even fairly ordinary estimate revisions are suddenly getting a lot more credit from investors, making the bear case a little harder to square. Snowflake (SNOW) added to the case this week, raising its revenue outlook as adoption of its AI-powered coding assistant accelerated, while Palo Alto Networks (PANW) was a reminder that even good AI stories can struggle when the bar gets high enough. Software spent much of the last year being cast as an “AI casualty,” but with estimates stabilizing and the disruption showing up a little less dramatically than feared, perhaps the market mistook a difficult set for the end of the match?

There was plenty of back-and-forth on the macro this week, with neither side quite ready to put the point away. There were some signs of moderation beneath the surface, with August ISM Manufacturing coming in broadly in line with expectations and July JOLTS pointing to some easing in labor demand, while Services activity remained resilient at 55.4 in August and price pressures stayed sticky. Today’s employment report added another shot to the rally, with nonfarm payrolls rising 162k while the unemployment rate held at 4.1%, a combination that kept the conversation around the Fed’s next move very much alive. Perhaps the economy is cooling, just not quite evenly, with enough softness in parts of

the data to keep the growth debate going but enough resilience elsewhere to make the path forward a little harder to call. Oil kept another ball in play, moving higher again on renewed Middle East tensions, while Fed Governor Christopher Waller emphasized the importance of next week’s August inflation data and signaled a willingness to hold rates steady if price pressures continue to ease. None of it necessarily changes the broader US macro picture, but with softer pockets of growth, resilient Services and inflation still hanging around the baseline, maybe the first few games of September are simply reminding us that this match could take a little longer to play out…

Asia had a few momentum swings of its own this week, though…