Why the Bond Market Suddenly Matters More than Nvidia
The AI rally powering Wall Street to record highs is running into a rapidly rising threat from the bond market, with Treasury yields now climbing fast enough to challenge the extreme valuations driving Nvidia and the wider tech sector.
“If 10-year Treasury yields keep moving toward 5%, investors are going to stop paying 30, 40 or 50 times earnings for growth stocks,” says Nigel Green, CEO of deVere Group, one of the world’s largest independent financial advisory organisations.
“This is where the pressure on AI valuations becomes much more serious.” The S&P 500 has surged roughly 12% since April’s temporary Middle East ceasefire reignited risk appetite, powered largely by Nvidia and a narrow group of AI-linked megacaps dominating index performance.
At the same time, the US 10-year Treasury yield has climbed to its highest level in more than a year as investors rapidly reprice inflation risks tied to oil above $100 a barrel and expectations interest rates could stay elevated for much longer.
“Wall Street has convinced itself AI can outrun interest rates,” says Nigel Green.
“Bond markets are now challenging that in a serious way.” Oil remaining above $100 a barrel following disruption linked to the Strait of Hormuz is intensifying fears inflation pressures are beginning to rebuild across the global economy.
A key market measure of inflation expectations, the one-year, one-year inflation swap, has now climbed above 4% for the first time since early 2025, reinforcing concern inside bond markets that central banks may struggle to bring inflation fully under control.
Markets that only months ago aggressively priced Federal Reserve rate cuts are now moving sharply in the opposite direction. “The AI trade works best in a falling-rate environment,” explains the deVere CEO.
“Bond markets are suddenly pointing in the opposite direction.
“Markets that spent months pricing aggressive Federal Reserve rate cuts are now rapidly reversing those expectations.” The implications for the wider AI sector are becoming increasingly difficult for investors to ignore.
High-growth tech companies are especially vulnerable to rising Treasury yields because much of their valuation depends on future earnings expectations.
As bond yields rise, the discount rate applied to those future profits rises too, reducing the present value investors are willing to pay for expensive growth stocks. Nvidia has become the clearest symbol of the concentration driving the current market rally.
The company’s explosive gains have helped propel US equity indices to repeated record highs, while a relatively small group of megacap tech stocks now accounts for a disproportionate share of overall market performance.
Nigel Green warns concentration risk across US equities is becoming increasingly dangerous. “Nvidia is now functioning almost like a macro asset rather than simply a semiconductor company,” he affirms.
“When one theme and a handful of stocks are carrying such a large percentage of market momentum, any repricing in yields can hit the broader market very quickly.” Pressure inside bond markets is also continuing to build globally.
Government borrowing costs have risen sharply across developed economies as investors reassess the outlook for inflation, central bank policy and fiscal spending. Markets that spent months pricing rapid monetary easing are now confronting the possibility rates stay higher for much longer.
History teaches us that major market corrections are often preceded by instability in fixed income markets rather than equities themselves.
Bond investors tend to react earlier to inflation risks, tightening liquidity conditions and deteriorating fiscal dynamics. Equity markets frequently adjust later — and often aggressively.
Nigel Green says investors focusing only on AI earnings momentum are missing the broader macro shift underway. “Cheap money has been one of the foundations of the explosive move in AI stocks,” he concludes.
“If yields continue moving sharply higher while oil remains elevated, the risk increases that bond markets — not earnings — become the catalyst for the next tech sell-off.”
