AI stocks stumbled again this week as investors rediscovered Treasuries as a haven. An AI-linked equities basket fell 4.9%, while the Nasdaq 100 posted its worst two-week drop since April of last year. Bond demand pushed the 10-year yield below 5% for the first time in a month, reviving a flight-to-quality trade that had disappeared over the summer.
The shift reflects growing skepticism toward bets that once looked nearly bulletproof: owning big tech while shorting defensive sectors. Jeffrey Blazek, co-chief investment officer of multi-asset at Neuberger Berman, which manages $630 billion, said the Treasury rally was evidence of a more significant change. "It came with a vengeance — we're seeing a flight to quality bid of Treasuries inverted to the AI trade," he said. "It's completely a plot twist."
Investor unease centers on the sums companies are borrowing and spending on AI, and whether the technology can deliver returns quickly enough to justify them. A Wall Street Journal report said Anthropic may spend $750 billion on additional computing power in coming years. Meta Platforms Inc. said it will spend about $825 billion on future computing power and AI infrastructure. Meta shares dropped more than 9% this week, and a measure of its credit risk hit a record high. Credit stress also showed up in the CDX Investment-Grade Index, which reached 64.4 on Friday, its highest intraday level since March.
Some prominent voices are pushing back. Treasury Secretary Scott Bessent told investors at a closed-door conference that he did not see a systemic problem with the AI boom, according to the Financial Times. Blackstone's Jon Gray struck a similar message. Still, with the S&P 500 down 0.5% and the Nasdaq 100 off 7.3% from its record earlier this month, bond markets are signaling caution.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing