Treasury bonds acted as a shock absorber on Thursday: chipmakers, the most sensitive part of the AI trade, fell 1% while the 10-year Treasury yield dropped 10 basis points, reviving the bond safety trade for at least a day. Stocks and bonds have sold off together for much of 2026 due to inflation, deficits, oil and AI financing needs, but this time fears about AI spending outweighed inflation worries after Anthropic's latest financial release fueled concerns about slowing growth. The article cautions that Treasury gains do not extend to corporate debt, as data-center firm CoreWeave's bonds turned distressed and its stock plunged, and credit spreads widened broadly.
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Through much of 2026, stocks and bonds have both sold off, as inflation, federal deficits, oil and the heavy financing needs of the AI buildout pushed bond yields higher. On Thursday, chipmakers fell 1% while the 10-year Treasury yield dropped 10 basis points, a sign that the Treasury safety trade may be returning amid concerns about AI growth sparked by Anthropic's latest financial release. The author argues one day is not a trend and that this safety trade does not extend to corporate bonds, as CoreWeave's bonds turned distressed and credit spreads widened. The next real test will come the next time US stocks sell off.
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The Dow Jones rose about 1% on Thursday as investors rotated from chip stocks into more defensive sectors after producer prices came in hotter than expected. The S&P 500 gained 0.3%, the Nasdaq 100 slipped 0.1%, and the Russell 2000 rose 1.4%. September producer prices rose 1.3% month over month and 6.3% year over year, their sharpest monthly and annual acceleration since 2022, stoking fears of further rate hikes with one currently priced in for December. The Nasdaq and AI-linked stocks came under pressure, with CoreWeave's debt burden as the catalyst, though Nvidia CEO Jensen Huang dismissed concerns about CoreWeave's financial stability and said Nvidia has no plans for a rescue package. In other news, Meta released Muse Spark Open, PepsiCo slipped 1% after KFC U.S. chose Coca-Cola, and EU antitrust officials are preparing to swiftly approve the Project Bromo coalition to counter SpaceX.
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AI-related stocks fell sharply as investors rotated out of tech into blue-chip companies and government bonds, with the PHLX Semiconductor Index down about 2% on Oct. 15 but still up 61% this year. South Korea's KOSPI plunged almost 8% on Oct. 15 and has fallen 18% over the past five sessions, while the Dow Jones Industrial Average rallied more than 400 points. Core producer inflation rose 0.7%, above estimates, pushing the 10-year Treasury yield below 5.1%, its lowest in about a month. Hendi Susanto of Gabelli Funds said the key risk is that expectations for AI are fragile, though demand for AI infrastructure components remains high. Torsten Slok of Apollo argued AI spending is not sensitive to interest rates, but higher borrowing costs could weigh on consumer spending.
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