The sharp rise in bond yields is raising concerns on Wall Street: AI trading may face new financial pressures. On Tuesday, the yield on the 30-year U.S. Treasury note rose to its highest level in 19 years, breaking through 5.33%. This trend has also spread overseas: the yield on Japanese 10-year government bonds hit a 30-year high, while the yields on German and French 30-year government bonds rose to their highest levels since 2011 and 2008, respectively. The continued rise in bond yields is related to market concerns about persistent inflation and the ever-increasing U.S. debt burden.
Investors are worried that high yields could dampen AI infrastructure construction, a key engine for U.S. stocks. Companies have pledged billions of dollars to build data centers, and AI-related stocks have surged on expectations of future high profits, but rising interest rates will depress the present value of these long-term profits, and high borrowing costs will also delay investment returns.
State Street Global Strategist Bartolini stated that rising bond yields will increase the discount rate used by the market to value future growth. If interest rates rise sharply and remain high, it will impact long-term growth stocks that have most of their high-growth forecasts in the more distant future. Bartolini points out that AI capital expenditures were initially driven by hyperscale enterprises and tech giants using their own funds; as the cycle progresses, these companies turn to debt financing. This shift makes their finances more sensitive to fluctuations in bond yields—rising yields will increase debt costs and compress cash flow.
Smaller AI players face greater survival pressure. Luria, head of technology research at D.A. Davidson, stated that rising borrowing costs will make it more difficult to launch AI data center projects, putting pressure on the entire industry. However, the impact is uneven: giants like Microsoft and Amazon have a buffer due to their diversified businesses and stable returns; while players like CoreWeave and Oracle, who rely more on debt financing, have greater risk exposure and will face more stringent market scrutiny. Luria points out, "For debt-dependent companies, low returns and high borrowing costs make them more vulnerable; even slight fluctuations in interest rates can shake their data center expansion plans."
