AI "stumbles," US Treasuries "feast"! Global "capital battle," the market gives its answer.

A battle over capital pricing power is unfolding in global markets. The AI super-capex cycle and the fiscal deficit cycles of governments around the world are simultaneously competing with the bond market for funds, triggering sharp volatility in the AI sector while pushing US Treasuries into long-awaited safe-haven buying. All of this points to the same conclusion: the logic of the era of cheap capital is being rewritten. This week, the Nasdaq 100 posted its worst two-week performance since April last year, a basket of AI-related stocks plunged 4.9% in a single week, and tech giants such as Meta suffered heavy losses. Meanwhile, the US Treasury market staged a strong reversal, with the 10-year Treasury yield falling below 5% for the first time in a month, long-end bond ETFs rising for three consecutive weeks, and bond fund inflows reaching about $58 billion this month, accounting for 38% of all ETF inflows. Capital voting with its feet reveals a profound shift in market sentiment. The previously almost unassailable Wall Street consensuslong mega-cap tech stocks, short defensive assetsis facing growing skepticism. Jeffrey Blazek, co-chief investment officer of multi-asset at Neuberger Berman, said bluntly: This is a complete plot reversalwe are seeing money rush into Treasuries, diverging from the AI trade. The AI capex narrative wavers, cracks appear in market trust Over the past two years, the AI trade has been perhaps the most unshakable consensus on Wall Street: long mega-cap tech stocks, short defensive assets. That consensus faced a substantial challenge this week. Investors' anxiety centers on one core question: can the enormous capital that tech giants are pouring into AI generate returns sufficient to match it within a short enough timeframe? Wall Street CN noted that Anthropic may spend $750 billion on additional computing power over the coming years. Meta CEO Zuckerberg subsequently announced that the company would spend about $825 billion on future computing power and AI infrastructure leases and contracts. After the news was announced, Meta shares plunged more than 9% this week, the biggest weekly drop since May, and the company's credit risk gauge simultaneously rose to a record high. Debt protection costs for other hyperscalers and chipmakers also jumped accordingly. At the same time, credit spreads on global corporate bonds widened broadly. The CDX investment-grade index, a key gauge of perceived risk in the US corporate bond market, rose intraday on Friday to as high as 64.4, the highest intraday level since March. The higher the index, the deeper investors' concerns about credit risk. It is worth noting that the AI-related stock basket and the 10-year Treasury yield have moved in the same direction for nine consecutive weeks, the longest such correlation since OpenAI launched ChatGPT. This is markedly different from the situation in Julywhen the AI trade cooled, Treasuries also came under pressure. The current setup means that wavering confidence in AI is being directly translated by the market into demand for safe assets. Treasuries' "safe-haven" attribute returns, the shift toward defensive positioning accelerates The bond market reversal came swiftly. At the start of the week, a flood of investment-grade bond supply pushed the 10-year Treasury yield up to 5.14% on Monday; then AI panic hit, and the curve reversed sharply. Treasuries rallied 12 to 18 basis points across the board on Thursday, with the belly of the curve outperforming and posting its best single-day performance in more than a year. The 10-year yield closed at 4.97%, falling below 5% on a closing basis for the first time in a month and breaking below its 50-day moving average for the first time since June. Goldman Sachs' Christian Gattellari said, "We have now broken through all CTA short-term buy triggers," with trend followers' short positions at 87% of maximum short positioning. Nomura's Charlie McElligott told clients that bonds are once again "playing their hedging function." Cameron Dawson, chief investment officer at NewEdge Wealth, offered this assessment: As the former stock market leadership turns defensive and credit indices flash stress signals, investors now have a reason to seek the relative safety of bonds. Fund flow data also confirms this defensive shift. According to Baird Strategas, the gap between demand for equity and fixed-income ETFs has fallen to the lowest historical decile range. Bloomberg data show that this month marks the second consecutive month in which fixed income has attracted more than 35% of overall ETF flows, the first time such a back-to-back occurrence has happened since early last year. Athanasios Psarofagis, an analyst at Bloomberg Intelligence, said, Bond inflows over the past two months have clearly exceeded normal levels, partly reflecting a more defensive asset allocation tilt, but the appeal of yields is also prompting investors to lock in returns. AI and governments compete for the same pool of capital Behind the market turmoil, a more structural tension is taking shape: the AI super-capex cycle and the government deficit financing cycle are crowding into the same bond market at the same time. Wall Street CN noted that companies need to build data centers, and governments need to cover deficits; the private sector needs financing to buy computing power, and the public sector needs financing to pay for welfare, interest, and defense spending. Both sources of financing demand are surging in the same direction, and unless savings supply increases by an equal amount, the price of capital will have no choice but to rise. This is not alarmism. Historically, the railway revolution ultimately transformed America, but 19th-century railway debt also triggered multiple financial crises; the internet ultimately reshaped the world, but the capital bubble around 2000 still burst. An industrial revolution that is right in the long run and pressure in the capital markets over the medium and short term are not mutually exclusive. In the post-financial-crisis era, the operating logic of global capital markets has been built on one core assumption: cheap capital will persist over the long term. The fiscal systems of governments, the expansion paths of tech companies, and the valuation frameworks for asset prices all depend on this assumption. Now that assumption is being shaken. The widening of credit spreads is already an observable early signal. If spreads at the weakest credit tier (CCC) remain under pressure, it means capital tightening is no longer just a technical issue in the rates market but is beginning to transmit to companies and assets with weaker financing capacity. This week, refinancing concerns pushed CCC-rated bond yields to 15.85%, the highest level since 2020. But the yield gap with all junk bonds currently stands at 7.48 percentage points, still 1 percentage point below the previous peaks reached in 2016 and 2020. There is a fundamental difference between "AI has value" and "AI investment is justified at any price"; likewise between "governments can issue debt" and "debt can expand indefinitely without cost." When capital is forced to be rationed among different demands, the first to come under pressure are marginal assets and weak credits, then the strain spreads to the broader capital markets and ultimately transmits to employment, consumption, and real investment. Perhaps the most profound change in this round of the bond market is not simply that yields have risen to some specific level, but that the market is beginning to re-accept a fact that had been forgotten: money is not infinite. This article is reprinted from "Wall Street CN," edited by GMTEight's Feng Qiuyi.