Record-High Rates Put Wall Street’s AI Rally to the Test
Rising borrowing costs are testing how long Wall Street can keep rewarding its biggest technology companies. Investors have continued to pour money into AI-l...
Rising borrowing costs are testing how long Wall Street can keep rewarding its biggest technology companies. Investors have continued to pour money into AI-linked stocks, pushing major indexes near records even as long-term Treasury yields approach levels last seen more than two decades ago.
The 10-year Treasury yield climbed above 5.3% last week, while the 30-year yield reached 5.69% — neither had been that high since 2002, according to Bloomberg. Yet the Nasdaq 100 set a fresh record Friday and has gained 22% this year. The S&P 500 stood less than 1% below its all-time high.
Rates challenge a powerful trade
Higher yields can make future corporate earnings less valuable in today’s terms, a concern for technology companies whose prices reflect expectations of growth far ahead. For now, enthusiasm for artificial intelligence has helped investors look past that pressure.
“With these higher rates, all of us are on edge,” Ken Mahoney, chief executive officer of Mahoney Asset Management, said.
The rally has drawn strength from expectations that demand for AI computing will keep expanding. Microsoft’s latest quarterly performance has been cited as evidence that investors remain committed to the trade, while market attention has also centered on whether Nvidia can sustain the momentum.
Infrastructure push brings in finance giants
Nvidia has also announced partnerships with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR to develop financing platforms for AI computing infrastructure. The company said the effort aims to mobilize more than $500 billion in third-party capital over time.
The proposed platforms are intended to provide dedicated funding for Nvidia customers and support infrastructure projects across its ecosystem, including AI labs, companies and cloud providers. The announcement underscores the scale of financing now being assembled around the technology.
But a deep pool of capital does not remove the market’s exposure to higher rates. Investors will be watching whether AI-related earnings and spending can keep supporting technology shares as Treasury yields remain elevated.
Source: bloomberg.com
