AI summary
Summary of article:
Wall Street executives are denying that there is an AI bubble, US technology stocks are still weakening and bonds and ETFs are attracting more money, indicating that investors are shifting from AI risk assets to defensive allocations such as government bonds.
Blackstone chairman says AI is not a bubble, US Treasury SecretaryBesant I don’t think there is a “systemic problem” with this craze. but never mindwall Street The market is still worried about how the top management will reassure them. Technology stocks have fallen, credit risks have risen, and funds have returned to US government bonds, indicating that investors are reevaluating their previously almost unanimously optimistic AI investments.
Nasdaq The 100 index suffered its biggest two-week decline since April last year, while indicators of both credit risk and market volatility climbed. A basket of AI-related stocks fell 4.9% as investors piled into U.S. Treasuries, pushing the 10-year yield below 5% for the first time in a month and reviving safe-haven purchases of Treasuries that had waned over the summer.
The move reflects growing skepticism about an investment strategy that was previously seen as a near-guaranteed win: buying big tech stocks and shorting defensive assets was tempered by concerns that AI spending could stoke inflation. Although some shocks have been weathered in the past, Jeffrey Blazek, chief multi-asset co-investor at Neuberger Berman, believes this week’s rise in government bonds could signal a more pronounced shift in the market winds.
“The buying is happening faster and faster,” Blazek said. “We are seeing a surge in high-quality US Treasuries as a safe haven, and this trend is the opposite of AI investing.” “It’s the complete opposite.”
Neuberger Berman’s asset allocation committee began reducing stock investment risks about a month ago due to concerns about AI investment overhang and rising interest rates.
US stocks fell this week, with the S&P 500 index falling 0.5% and the Nasdaq 100 index, dominated by technology stocks, falling 0.8%. This month it has fallen 7.3% from its all-time high. On the other hand, the largest long-term government bond ETF has risen for three consecutive weeks, with this month’s gain expected to be the largest since February last year.
Fund flows also reflect this change. Baird Strategies data shows that the gap in capital flows between stock ETFs and fixed-income ETFs has fallen to a historically low 10% range, and investors are increasingly preferring bonds.
Investors are most uneasy about how large sums of money companies have invested and borrowed for AI, and whether the technology can bring sufficient returns over time to support these expenditures. The Wall Street Journal reported this week that major AI developer Anthropic could invest an additional $750 billion in buying computing power over the next few years.
Zuckerberg’s subsidiary Meta said future lease and contract spending for computing power and AI infrastructure will reach approximately US$825 billion. Meta’s share price fell more than 9% this week, its biggest weekly decline since May. After the news was announced, the company’s credit risk also reached a record high. The cost of hedging against loan defaults has also increased for other hyperscale data center operators and chip makers.
Global corporate bond yield premiums also increased. The CDX investment grade index, which measures credit risk in the US corporate bond market, rose 1.5 basis points on Friday to 64.4, reaching its intraday high since March. The rise in the index means investors are more concerned about credit risks.
As investors are reevaluating the impact of AI on the economy, a basket of AI stocks and the U.S. 10-year Treasury bond yields have moved in the same direction for nine consecutive weeks, the longest such period since ChatGPT was launched. This is different from the situation in July when both AI stock and government bond prices weakened.
Cameron Dawson, chief investment officer at NewAge Wealth, said: “Stocks that had previously gained have fallen, the market has turned defensive, and credit indexes have also shown signs of stress. Investors now have reason to seek the relative safety of bonds.”
However, even though the bond market is showing warning signs, a significant number of people still do not believe that AI investments will pose a major threat to the overall market.
