Global equity funds draw inflows for second week as AI optimism holds

Global equity funds experienced a surge in inflows for the second consecutive week, buoyed by optimism surrounding AI investment and a decline in US inflation. The funds saw net inflows of $34.76 billion in the week ending September 30, a reduction from the previous week's $44.31 billion, according to LSEG Lipper data. The surge in demand for stocks came as investors remained cautious despite a rise in bond yields.

The optimism surrounding AI spending was a key driver behind the inflows, with Micron Technology recently projecting quarterly revenue above estimates, indicating a strong demand for memory chips utilized in AI applications. Goldman Sachs forecasted that the largest U.S. hyperscalers would spend around $800 billion on capital expenditure in 2026, with expectations for this spending to climb to $1.1 trillion in 2027.

This investment was supported by robust revenue backlogs and a supply-constrained environment, coupled with an accelerated growth in cloud revenue among major providers this year. Additionally, the U.S. inflation rate in August was lower than anticipated, while the price pressures in July were more moderate than initially reported, further easing the Federal Reserve's urgency to raise interest rates again in October.

Investors made net purchases of $20.6 billion in U.S. equity funds for the second week in a row. European and Asian equity funds also attracted net inflows of $6.19 billion and $6.16 billion, respectively. However, sectoral funds saw net weekly outflows of $919.7 million as investors withdrew $2.63 billion from technology funds following a three-week buying streak.

They did, however, buy $1.13 billion in financial funds and $468 million in utility funds. Global bond funds also attracted $4.76 billion in inflows for the second consecutive week, although this was significantly lower than the $9.24 billion recorded in the previous week. Short-term and government bond funds continued to register significant inflows of $5.43 billion and $4.13 billion, respectively, while high-yield bond funds experienced outflows of $2.29 billion.

Meanwhile, money market funds posted net outflows of $116.52 billion, the largest withdrawal since April 15. Among commodity funds, gold and precious metals funds saw net weekly purchases of $275.2 million, their smallest inflow in three weeks, while energy funds posted net weekly outflows of $559 million following inflows of $89.3 million the previous week.