Treasury Bonds Regain Safe-Haven Role as AI Selloff Deepens
U.S. Treasuries are again cushioning investors as artificial-intelligence shares slide, reversing a pattern that had left government bonds offering little pr...
U.S. Treasuries are again cushioning investors as artificial-intelligence shares slide, reversing a pattern that had left government bonds offering little protection when tech stocks fell. The shift became clear this week as worries about the cost and eventual returns of AI investments swept through global markets.
On Thursday, the Nasdaq dropped 2.6% and the Nasdaq 100 fell 2.9%, while U.S. Treasury yields sank as investors sought safety. A measure tracking the inverse relationship between government bonds and AI-focused stocks strengthened to a level last seen a year ago, Bloomberg reported.
AI spending worries spread
The selloff reflects doubts about whether the vast sums flowing into AI will generate returns to match. Meta shares came under pressure after the company’s free cash flow turned negative, while Alibaba fell 6% as investors questioned the payoff from its AI investments. China’s market entered bear territory, according to Semafor.
The strain was not confined to technology. Markets also faced a jump in Brent crude to a five-month high and unrest in France. South Korea’s stock market fell 3.5%, China’s dropped 2% and Japan’s lost 2.5%, Reuters reported. European shares recorded their steepest decline in three weeks.
As concern about the technology downturn spilled into the economic outlook, traders reduced expectations for a U.S. interest-rate increase this year. The move suggests investors are weighing whether AI-related losses could carry broader consequences, not just hit the valuations of technology companies.
Officials push back on bubble fears
U.S. Treasury Secretary Scott Bessent dismissed the prospect of systemic economic risks from the AI boom on Wednesday, the Financial Times reported. Blackstone President Jon Gray also rejected comparisons with the dot-com bubble of the 1990s, saying demand for an AI consulting firm backed by his company was “almost parabolic.”
That optimism contrasts with the market’s reaction. Investors are selling shares tied to the AI trade and moving toward Treasuries, restoring a traditional hedge that had weakened amid inflation concerns and higher interest rates. The bond rally is now tied closely to whether doubts about AI spending deepen — and whether they continue to reshape expectations for the U.S. economy and Federal Reserve policy.
Source: bloomberg.com
