US Treasury prices jumped on Friday as a tech-led selloff raised fresh doubts about whether the massive spending on artificial intelligence will ever pay off. Investors seeking safety piled into bonds, pushing the benchmark 10-year yield down to 4.925% — a level that reflects a sharp shift in market sentiment.
According to Reuters, the 10-year yield fell 6 basis points on the day and was on track to be down 36 basis points in October. That would mark its biggest monthly drop since December 2023. Yields fall when bond prices rise, so this move signals strong demand for the safety of US government debt.
What triggered the risk-off move?
The anxiety started in the stock market. Nasdaq futures slid 2% after earnings updates from Amazon and Intel. Amazon shares dropped 7% in premarket trading after the company signaled even heavier spending on AI infrastructure. Intel plunged 25% after warning it would burn through cash this year, a stark reminder that not every chipmaker is reaping the rewards of the AI boom.
This followed a sharp decline in Alphabet shares the previous session, as investors questioned whether the tech giant's massive AI investments would generate sufficient returns. The worries spread across the semiconductor sector, with the Philadelphia Semiconductor Index down 9% in October.
The selloff is part of a broader pattern: AI spending doubts have pushed global markets into defensive mode, with tech stocks tumbling from Wall Street to Asia. Japan's Nikkei fell 3% and South Korea's KOSPI dropped 3.5% as chipmakers bore the brunt of the selling.
Why Treasuries rallied despite strong data
What stood out to market watchers was that Treasuries rallied even though recent economic data showed strong growth and sticky inflation. Normally, that kind of backdrop would push yields higher, not lower. But when equities get jumpy, it isn't only human investors seeking safety. Many multi-asset funds target a set level of portfolio volatility. When stock volatility jumps, these funds automatically cut equity exposure and add the most liquid "duration" they can find — often benchmark Treasuries. That extra demand can push long-term yields down even when the economic backdrop would normally keep them elevated.
This mechanical buying can amplify moves. As one trader put it, "Big tech earnings can now move bonds through plumbing, not just headlines."
What it means for investors
For everyday investors, a 10-year yield at 4.925% shows how quickly AI jitters can turn into rate relief. The 10-year Treasury is a benchmark for many borrowing costs across the economy. When its yield drops, it can lower borrowing costs for investment-grade companies and, over time, take some pressure off mortgage rates — even if short-term rates stay high.
In other words, markets can get easier financial conditions from a risk-off day. That's a dynamic worth watching whenever AI spending starts to look less certain.
However, it's important to note that traders are still assigning meaningful odds to another Federal Reserve rate increase later this year. The bond market's rally doesn't necessarily signal that the Fed will cut rates soon; it reflects a flight to safety, not a change in monetary policy expectations.
For investors, the key takeaway is that the AI trade — which has driven much of the stock market's gains over the past year — is now a source of volatility. As Europe's tech stocks slip and Asian markets feel the ripple effects, the question is whether the selloff is a healthy correction or the start of a deeper reassessment of AI's economic value.
For now, the bond market is sending a clear signal: when tech wobbles, investors still see Treasuries as the ultimate safe haven. That's a reminder that diversification — holding a mix of stocks and bonds — can help cushion portfolios when the market's favorite sector stumbles.
