Big Tech selloff drives investors back toward U.S. Treasuries

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Investors rotate from Big Tech into Treasuries

Treasury yields fall as investors seek safety

According to the Financial Times, investors are increasing their exposure to U.S. Treasuries while reducing positions in riskier assets. The real yield on 10-year Treasury inflation-protected securities (TIPS) fell to around 2.58% over the past week, its lowest level since early September. Yields on five-year and 30-year Treasuries also moved lower.

The bond buying coincided with renewed pressure on technology stocks. The Nasdaq 100 lost 2% during the final week of October. Investors are increasingly favoring the more predictable returns available in bonds over expensive equities whose valuations depend heavily on the continuation of the AI boom.

Big Tech earnings fuel doubts over AI investment returns

The latest round of corporate earnings has intensified concerns about the returns being generated by AI spending. Results from Alphabet, Amazon and Intel disappointed the market, while rising capital expenditures across the largest technology companies have pushed investors to scrutinize cash flows more closely.

The reaction to Intel was particularly severe. Intel shares plunged 29% after the earnings report, marking the stock’s worst one-day decline since 1974. The scale of the selloff underscored how quickly investors are punishing companies when guidance or future growth expectations fall short.

The broader technology selloff accelerated after quarterly results were released. Markets are no longer automatically rewarding companies simply for spending more on data centers and chips. Investors increasingly want evidence that those investments can translate into sustainable profits.

Strong GDP growth masks rising economic risks

The U.S. economy is still showing resilience. Third-quarter GDP grew at a 3.4% annual rate, beating expectations. Yet the economy’s growing reliance on data-center construction, equipment purchases and AI infrastructure investment is raising a different concern: a slowdown in that investment cycle could affect not only technology stocks, but broader economic growth as well.

As Traders Union previously noted, a correction in AI-related stocks does not necessarily mean the technology boom is over. It may instead reflect a repricing of stretched valuations after several years of outsized gains.

Until investors see more convincing evidence that AI spending can generate adequate returns, demand for Treasuries may remain strong while technology stocks continue to face pressure.

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