A rise in US10Y above 5% could trigger a sharp correction in overvalued AI-related equities, warns a prominent investment chief.
The artificial intelligence sector’s rapid valuation surge faces a critical test if the 10-year U.S. Treasury yield breaches 5%. Higher borrowing costs could erode the premium investors pay for growth stocks, particularly in AI, which has led market gains this year.
The 10-year yield currently hovers near 4.7%, up from 3.9% at the start of 2024. Analysts note that prior spikes above 5% in 2022 and 2023 coincided with broad equity sell-offs, though tech stocks rebounded quickly once yields stabilized.
No immediate market reaction was observed following the warning, as traders await fresh inflation data and Fed commentary later this week.