Adam Spatacco, The Motley Fool
6 min read
September has a reputation problem on Wall Street, and if you own a basket of artificial intelligence (AI) stocks, it is hard to ignore. Investors talk about the September Effect the same way people talk about the first week back at the office after a summer vacation: The pace picks up, patience is thin, and small problems suddenly feel bigger.
Since 1928, the S&P 500 (SNPINDEX: ^GSPC) has posted an average return of -1% in September. The Nasdaq Composite (NASDAQINDEX: ^IXIC) features a similar September decline since its inception in 1971.
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The long-running theory behind September sell-offs is that as fund managers come back from vacation, they rebalance their portfolios — taking gains in stocks that have rallied hard while harvesting losses from laggards.
The ironic part of the September Effect is that the month actually finishes higher almost as often as it finishes lower. It’s just that long-term average returns get dragged down by the ugliest years.
For those invested in the AI complex, the question is not whether a calendar anomaly exists. It is whether the September Effect still applies once you zoom in on the specific stocks that have defined the AI revolution over the last few years.
The September Effect vs. the AI boom
The AI trade did not really get going until late 2022, after OpenAI commercially launched ChatGPT. While small, this gives us a useful sample: the Septembers of 2023, 2024, and 2025. Interestingly, they do not tell a linear story.
September 2023
The S&P 500 dropped about 5%, while the Nasdaq fell closer to 6%. Nvidia, which had just entered the trillion-dollar club, lost more than 10%. Macroeconomic factors, including relatively high interest rates and the possibility of a government shutdown, would be enough to make most investors uneasy in a normal year.
But when you layer on the fact that no one had ever witnessed anything quite like the AI boom, investors simply decided they had seen enough rallying in tech stocks for the time being. It felt like the September Effect arrived right on schedule and rocked the most expensive names hardest.
September 2024 and 2025
September 2024 was modestly positive for the S&P 500 and the Nasdaq, with both indexes rising about 2%. Big tech also fared well, with the “Magnificent Seven” rising anywhere between 2% and 22% during the month.
The script changed entirely in September 2025. The Nasdaq Composite jumped nearly 6%, while the S&P 500 rose 3.5%. Once again, megacap tech collectively boasted a strong performance, with Tesla and Alphabet rising 33% and 14%, respectively. The seasonal weakness that everyone usually braces for simply did not show up.
