Bond Markets Rally as Investors Reassess Growth Outlook for US AI Tech Sector

Bond markets have surged as investors weigh the risk of stagnation in the United States' technology and artificial intelligence sector, even after the US economy posted hotter-than-expected growth figures in the last quarter. While the numbers surprised some observers, market participants are increasingly focused on where that growth originates — and whether it can be sustained in the coming months.

According to the Financial Times, the bond trade has gathered momentum following a recent pullback in the AI-driven tech sector, with companies including Intel, Meta, Amazon, and Alphabet all experiencing notable drops in market capitalization last week. Because names like Meta, Amazon, and Alphabet rank among the largest companies in US equity indexes, their pullback carries outsized weight in headline market performance. The shift pushed real yields — the inflation-adjusted return on government debt, which moves inversely to bond prices — to seasonal lows, with the 10-year yield falling to as low as 2.58% this week. Since Treasury yields also serve as a reference point for borrowing costs across the economy, the move is being watched well beyond trading desks.

The dynamic reflects investors rushing into bonds as they reassess the ability of the US tech and AI sector to keep growing, betting that bonds will perform better than stocks.

"The market had been underwriting strong growth — underpinned by AI and the expectation that there would be some relief in the Middle East — and now we're re-evaluating some of the growth expectations," said Bill Campbell, portfolio manager at DoubleLine.

Jason Granet, chief investment officer and head of credit services at BNY, also pointed to investor concerns about whether AI companies can maintain their current growth levels going forward.

"Because AI companies grew so much last year, it will be harder to beat those numbers. Growth may be decelerating, but it doesn't necessarily signal weakness in the economy," he said.

Other economists have raised similar concerns about the composition of stock market growth in the United States and globally, with technology and AI spending increasingly serving as a driving factor.

Vincent Reinhart, chief economist at BNY Investments, described the current state of affairs as worrisome.

"It is so heavily dependent on technology expenditure. And it is not just a U.S. phenomenon; it's a global phenomenon. You don't have to be a tech pessimist to be worried," he said.

The comment gets at why the make-up of growth, rather than its headline pace alone, has moved to the center of the debate: when a large share of market gains rests on a single spending theme, the overall numbers become more sensitive to any shift in that theme.

What happens next will hinge on data rather than narrative. Upcoming US growth releases, along with the next round of results and capital-spending updates from the AI-linked companies behind last week's declines, will show whether the deceleration Granet describes deepens or steadies. In the meantime, the 10-year real yield remains the most visible running gauge of how firmly investors have shifted toward defensive positioning.

The warnings have not come only from traditional economists. Arthur Hayes, co-founder of the now-defunct BitMEX exchange, has also expressed the view that the inevitable burst of the AI bubble will cause a market drawdown, with the US government ultimately stepping in to rescue the too-big-to-fail AI giants by printing millions.