AI Earnings Up 57%, Cash Payouts at a 20-Year Low | Stock Market

AI-driven earnings growth is masking a free cash flow and margin-of-safety squeeze, with the equity risk premium now below 4% for the first time in 2026.

• Thin margin of safety: Damodaran's implied equity risk premium fell to 3.70% (expected stock return 8.99% minus 10-year Treasury's 5.29%), below the 4% threshold for the first time in 2026.
• Rate shock, market defies it: The 10-year jumped 54bps to 5.29% in September 2026 (top-10% monthly move since 1962), yet the market added $2.5 trillion, with tech alone contributing $1.5T.

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