The Bond Market Is Sending a Warning Stocks Can’t Ignore
Summary
While most investors remain focused on the stock market, especially tech and AI stocks, the bond market has been making a more notable move recently. U.S. Treasury yields have risen sharply, with the 30-year yield reaching about 5.34% on August 18, its highest since 2007. Long-term yields have also risen across major bond markets, including Germany and Japan. Rising bond yields increase the risk-free rate, reducing the present value of future earnings, which pressures high-valuation tech and AI companies that rely on distant profits.
Bubble analysis
Rising bond yields directly threaten the high valuations of AI stocks, as AI companies' value depends heavily on profits expected years into the future, and higher discount rates reduce the present value of those profits. This provides macro-level support for the AI bubble thesis, but it does not directly involve AI industry capex or revenue figures.
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