AI Trade Stalls as 10-Year Yield Nears 5% on Fed, Iran Liquidity Squeeze
Updated
Updated · InvestorPlace · Sep 8
AI Trade Stalls as 10-Year Yield Nears 5% on Fed, Iran Liquidity Squeeze
1 articles · Updated · InvestorPlace · Sep 8
Summary
QQQ has sat near its early-May level and SMH has fallen since then, even as AI-linked earnings expectations kept rising and Nvidia’s post-results pop quickly faded.
Excess liquidity turned negative for the first time since late 2023 in its sharpest drop since the 2022 bear market, compressing valuations despite stronger fundamentals.
The squeeze intensified after Kevin Warsh became Fed chair in May: the 10-year Treasury yield climbed from about 4.4% to 4.8%, while renewed Iran tensions pushed oil back toward $90 and lifted inflation expectations.
S&P 500 forward operating margins have climbed to roughly 21% from a long 14% to 16% range before ChatGPT, supporting the view that AI remains a profit driver rather than a weakening theme.
The report argues the pause could reverse if Iran tensions cool, oil falls toward $70 to $80 and the Fed softens, with AI infrastructure spending still projected by PwC to reach $31.6 trillion through 2050.