According to BlockBeats, Panmure Liberum strategist Joachim Klement has highlighted the significant investments being made by tech giants in artificial intelligence, which are contributing to the ongoing rise in U.S. stock markets. However, the increasing yields on long-term U.S. Treasury bonds are threatening the investment surge in infrastructure such as data centers. The challenge for AI investments lies in the substantial funding required, much of which depends on debt financing. Since 2023, long-term Treasury yields have risen significantly, with a recent slight decline, and are expected to continue increasing through 2026. This trend will elevate debt costs, rendering some investment projects unprofitable.
Data indicates that for every 1% increase in long-term Treasury yields, the growth rate of IT equipment investment may decrease by 0.6%, while software investment growth could decline by 0.4%. Although higher Treasury yields will not completely stifle growth, they will inevitably cause delays. Given that current valuations already reflect overly optimistic expectations, this could lead to downward revisions in earnings forecasts for large-scale enterprises and other growth stocks.
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