October 2 (Reuters) – As of the week ending September 30, U.S. equity funds recorded net inflows for the second consecutive week, thanks to the market's ongoing enthusiasm for artificial intelligence and inflation data that fell short of expectations, which alleviated concerns about rising yields on U.S. Treasury bonds.

LSEG Lipper data shows that investors made a net purchase of $20.6 billion in US equity funds during the week, compared to a net purchase of $37.49 billion in the previous week.

Sustained demand for AI drove the Nasdaq Composite Index to a record high last week and supported the U.S. stock market this week, despite the 10-year U.S. Treasury yield rising to a 24-year high. Micron Technology projected earnings to exceed market expectations on Wednesday, indicating strong demand for AI memory chips in the market.

Meanwhile, a report released by the U.S. Department of Commerce on Wednesday showed that inflation in the United States rose less than expected in August, and price pressures in July were also milder than initially reported, which reduces the urgency for the Federal Reserve to raise interest rates again in October.

U.S. large-cap stock funds attracted $19.33 billion in inflows, the second-largest weekly net inflow in the past quarter. Mid-cap stock funds drew $1.01 billion, small-cap stock funds attracted $223 million, while mid-cap stock funds recorded a net outflow of $329 million.

However, industry stock funds experienced a net outflow of $4.1 billion that week, with the technology sector seeing a net sale of $3.79 billion and the industrial sector a net sale of $738 million, leading the decline among all sectors.

U.S. bond funds recorded a net inflow of $6.45 billion this week, the largest in three weeks.

Short- to medium-term government bonds and U.S. Treasury funds attracted $4.3 billion, marking the largest inflow in four weeks. Investors also poured $4.02 billion into general domestic taxable fixed-income funds, while withdrawing a net $2.28 billion from short- to medium-term investment-grade funds.

Meanwhile, money market funds saw a net outflow of $41.36 billion for the week, marking the third consecutive week of net redemptions over the past four weeks.

(Reported by Gaurav Dogra, Edited by Diti Pujara)