There's a new story in stock markets: If you aren't touched by AI, good luck.

Artificial intelligence is sucking in capital and squeezing the rest of the market, where stocks face higher interest rates and oil prices without a sexy technology story to sell.

The new pattern took hold in September, when Treasury yields skyrocketed-and it's creating stress in other debt markets too.

In stocks, the headline indexes appeared remarkably resilient in the face of a 10-year Treasury yield jumping from 4.7% to 5.3%, with the S&P 500 down only slightly and the technology-heavy Nasdaq-100 gaining 3%.

But under the surface, September's stock-price moves show how narrow the market has become. Almost 80% of stocks in the S&P were down, the average stock was off 5% and only two out of 11 sectors were up, led by tech. The other gainer, communications services, was up only because tech giants Meta and Alphabet, not classified as tech stocks, outweighed losses for almost all the media and telecoms companies in the sector.

Smaller stocks fared even worse, hitting hopes that they were on a firmer path after gains earlier in the year. The Russell 2000 index of smaller companies was down 5% in the month, while the top 50 stocks rose 2%. The same pattern shows up within the S&P 500: 41 of the largest 100 stocks rose, while only 10 of the smallest 100 constituents eked out a gain.

The common, if not exclusive, factor among the risers: AI and data-center supply-chain exposure.

In theory higher bond yields can coincide with rising stocks, when both are driven up by a stronger economy. And the U.S. has a stronger economy, with third-quarter growth running at 3.7% based on data released so far, according to the Atlanta Fed's GDPNow, although Friday's jobs figures were weaker than expected.

But the stronger economy pushed the Federal Reserve to restart rate rises in an effort to slow things down, because there's not enough spare capacity to support this level of growth without too much inflation.

The result is that, outside AI, companies and consumers are being hit by a triple-whammy of higher rates, higher fuel prices and competition from AI firms for staff, equipment and capital.

Excluding AI technology companies, capital expenditure "is running at zero," says Arend Kapteyn, chief economist at UBS's investment bank.

That's a bad sign for companies that are also being hit by higher borrowing costs. On top of the increase in Treasury yields, the extra "spread" paid for corporate bonds has begun to rise.

Particularly hard hit are the weakest CCC-rated borrowers, where the spread above Treasurys jumped by more than a percentage point in September to surpass the level reached in the U.S. tariff selloff in April last year. Weaker credit also led to higher spreads on municipal bonds, mortgage bonds and, in the eurozone, weaker governments led by France and Italy.

Wall Street thinks the profit boom that helped stocks earlier this year is done, too. Analyst earnings forecasts for next year had risen solidly since February but have flatlined in the past few weeks.

"In the first half of the year we had this fast and furious rise in both earnings and earnings expectations," said Christian Mueller-Glissmann, head of asset allocation research at Goldman Sachs. "Since the summer the earnings tailwinds have started to moderate. Earnings are still strong but the market cares a lot about the second derivative, the earnings revisions."

The question for investors is whether bond yields and oil calm down or keep squeezing the rest of the economy. The problem is that hopes for AI profits are so elevated that higher financing and energy costs aren't slowing investment plans, keeping the AI-driven parts of the economy red-hot.

In the absence of Middle East peace, AI gains spreading superfast across the economy or an AI pullback, the route to lower yields and less energy demand involves the rest of the economy cooling enough to offset AI's demand. In the process, expect stocks outside tech to struggle, earnings to expand more slowly and concern about credit risk to grow.