Traders were willing to give companies like Meta Platforms Inc. (META) and Microsoft Corp. (MSFT) a great deal of leeway when they were spending their own money to build AI infrastructure. Now that they are borrowing other people’s money to pursue those goals, they have to answer some important questions, writes Eoin Treacy, editor of Fuller Treacy Money.
The mega-cap companies had developed large cash positions following a decade of high-margin growth. These fortress balance sheets offered them a great deal of leeway to pursue growth opportunities, and investors were happy to go along for the ride.
10-Year Treasury Yield (^TNX)
But now, investors are impatient to see returns on their investment. They want to see broad-spectrum growth in AI billables. Meanwhile, Treasury yields have fallen below the 5% level over the last few weeks.
Bottom line? The large downward dynamics posted recently by the biggest beneficiaries of AI spending followed through on the downside last week. This is very bearish activity.
