Tatton Asset Management says fading AI optimism drives shift from stocks to bonds
TLT•Tatton Asset Management linked a shift from stocks into government bonds to weakening optimism about AI profit growth. Government bond yields fell as expectations of a more hawkish Federal Reserve response to 3.7% US inflation weighed on growth prospects, while CoreWeave’s five-year bond yield exceeded 15%.
1. AI optimism weakens
Tatton Asset Management’s analysis linked the shift from stocks into government bonds primarily to weakening optimism about AI profit growth. Government bond yields fell sharply as expectations of a more hawkish Federal Reserve response to 3.7% US inflation dampened growth prospects.
2. Debt and currency risks
CoreWeave’s five-year bond yield breached 15%, reaching distressed territory amid reports of slowing demand for AI computing power. A weaker dollar compounded US stock losses for UK investors, raising the risk that prolonged currency volatility could prompt capital repatriation.
3. Earnings in focus
Strong third-quarter earnings could ease AI concerns, though newly disclosed long-term lease obligations could expose greater debt burdens.
