AI spending boom could keep interest rates higher for longer, Apollo economist says
TLT•Apollo chief economist Torsten Sløk warned that AI spending could weaken the impact of monetary tightening and keep interest rates higher for longer. Investors expecting returns above 10% may sustain infrastructure spending even as the 10-year Treasury yield rose about 125 basis points over the past year.
1. AI spending and rates
Apollo chief economist Torsten Sløk warned that AI spending could weaken the impact of monetary tightening and keep interest rates higher for longer. Many AI investors expect returns above 10%, compared with an approximately 4% federal funds rate, supporting continued infrastructure spending. The 10-year Treasury yield rose about 125 basis points over the past year, while analysts raised 2027 capital expenditure expectations.
2. Borrowing cost risks
Persistent fiscal deficits and heavy Treasury issuance could raise the term premium and keep long-term borrowing costs elevated despite potential oil-price relief. Disappointing AI returns could trigger sharp reassessments of valuations and capital expenditure plans.
