Analyst: High U.S. Treasury yields may delay the AI boom

Jinse Finance reported that Panmure Liberum strategist Joachim Klement stated that tech giants are pouring massive amounts of capital into the artificial intelligence sector, thereby driving the continued rise of the U.S. stock market. However, the steadily increasing long-term U.S. Treasury yields are threatening the investment boom in infrastructure such as data centers. The challenge facing the AI investment boom is that the enormous funds required need to be raised through financing, with a significant portion of investments relying on debt financing. Since 2023, long-term Treasury yields have risen significantly (with the exception of a recent pullback) and may continue to climb through 2026. This will drive up debt costs, causing some investment projects to become unprofitable. Data shows that for every 1 percentage point increase in long-term Treasury yields, the growth rate of IT equipment investment may decline by 0.6 percentage points, and the growth rate of software investment may decline by 0.4 percentage points. Although higher Treasury yields will not completely stifle growth, they will inevitably cause delays. Given that current valuations already reflect overly high expectations, this could lead the market to revise down earnings forecasts for mega-cap companies and other growth stocks.