Investors are turning to U.S. Treasury bonds as the AI‑driven technology sector shows signs of slowdown, driving the 10‑year real yield down to 2.58%, the lowest level of the season. The shift follows notable market‑cap declines at major AI‑linked companies such as Intel, Alphabet, Meta and Amazon, prompting a reassessment of growth expectations for the sector.

Tech and AI Stocks Retreat

According to the Financial Times, the recent pullback in AI‑heavy equities has been swift, with the four named firms experiencing sizable drops in market value over the past week. The decline comes despite the broader U.S. economy posting hotter‑than‑expected third‑quarter growth, raising concerns that the recent expansion may be driven more by AI‑related spending than by underlying fundamentals.

Bond Market Reaction

The bond market’s response has been a marked rally, as investors seek the relative safety of fixed‑income assets. Real yields on the 10‑year Treasury fell to 2.58%, a seasonal trough, reflecting heightened demand for government debt. DoubleLine portfolio manager Bill Campbell noted that markets had been "underwriting strong growth — underpinned by AI and the expectation of relief in the Middle East — and now we’re re‑evaluating some of the growth expectations."

Analyst Perspectives on Growth Sustainability

BNY’s chief investment officer Jason Granet warned that the rapid expansion of AI companies last year sets a high bar, making future growth harder to sustain, though he cautioned that slower growth does not necessarily signal broader economic weakness. BNY chief economist Vincent Reinhart added that the global economy’s heavy reliance on technology expenditure is worrisome, even for those who are not "tech pessimists."

What to Watch Next

Observers will monitor whether the bond rally continues as AI‑related earnings reports roll out, and whether any policy response emerges to address potential over‑investment in AI. Additionally, sentiment from cryptocurrency markets, where figures like former BitMEX co‑founder Arthur Hayes predict a possible government bailout for struggling AI firms, could add another layer of volatility to the broader financial landscape.