AI capital expenditure sparks a crisis of confidence, with funds shifting to US Treasuries as a safe haven.

As capital expenditure by AI giants continues to surge, the market is questioning whether related investments can generate sufficient returns. The US tech sector is under pressure, with funds accelerating flows into US Treasuries. The Nasdaq 100 index notched its worst two-week performance since April 2025, with a basket of AI-related stocks falling 4.9% this week, and Meta’s share price dropping over 9% in a single week. In the bond market, the 10-year US Treasury yield briefly climbed to 5.14% at the start of the week before retreating rapidly, closing at 4.97% on Thursday – marking its first dip below 5% in a month. This month, bond ETFs saw inflows of around $58 billion, accounting for 38% of total ETF inflows, reflecting rising investor defensive sentiment. The core market concern is that AI firms and governments globally are expanding their financing needs simultaneously, competing for limited capital resources. Anthropic has committed up to $750 billion in compute spending over the next several years, while Meta also plans to invest heavily in compute and AI infrastructure. Meanwhile, the US government’s ongoing bond issuance is exacerbating capital supply-demand strains. The credit market is also showing signs of stress: the credit risk gauge for US investment-grade corporate bonds rose to its highest level since March, and yields on CCC-rated bonds hit 15.85%, the highest since 2020. Analysts argue that AI’s long-term growth prospects are not equivalent to short-term investment returns. As capital costs rise, firms with weaker financing capabilities may face pressure first, and the market is reassessing risks tied to high-valuation assets.