AI trade cools sharply, safe-haven bids flood into US Treasuries! The "anchor of global asset pricing" is on track for its first monthly decline in eight months.

During Friday's Asian trading session, the rally in US Treasuries accelerated further. A large-scale selloff in technology stock themes across US and global equity marketsincluding AI computing power leaders and the semiconductor sectordrove global investors to actively rotate into US government bonds in search of a safe haven. US Treasury yields fell by at least 2 basis points across the curve, extending the downward move from the New York session. Australian, Japanese, and New Zealand bonds followed suit, with their benchmark 10-year yields each falling about 5 basis points. Disappointing results and forward guidance from AI cloud-focused mega-cap technology giants such as Google parent Alphabet and Amazonespecially cash flow figures that fell far short of market expectationssignificantly reinforced market doubts about the AI trade theme and the pessimistic stance that the AI bubble is about to burst, accelerating the flow of safe-haven capital. Meanwhile, the world's largest cryptocurrency exchange Binance was suspected of being hacked, further heightening risk aversion. The benchmark Treasury yield indicatorthe 10-year US Treasury yield known as the "anchor of global asset pricing"has fallen by nearly 40 basis points cumulatively in October and is on track for its first significant monthly decline since February. Kenneth Crompton, head of rate strategy at National Australia Bank in Sydney, said: "After this week's tech company earnings, a fresh wave of risk aversion this morning has once again pushed bonds higher and yields lower." During Friday's Asian trading session, Nasdaq futures extended their decline to more than 2%, with Amazon and Intel falling 7.7% and 23% respectively in overnight US trading, Nvidia down 2.5%, Micron Technology down 4.4%, and Oracle down 4%. Intel, whose forward guidance was disastrous, plunged as much as 23% overnight. As of press time, South Korea's KOSPI indexweighted more than 50% toward the two major memory chip giants SK Hynix and Samsunghad fallen more than 5.6%, and the Korea Exchange triggered a sidecar mechanism on the KOSPI during intraday trading; the Nikkei 225 fell nearly 3%. As shown in the chart below, US Treasuries are on track for their best monthly return since February 2025. A Bloomberg benchmark US Treasury index tracking market returns has risen 2% in October and is on track for its largest monthly gain since February 2025. Over the past month, deteriorating market sentiment toward AI-related stocks has been the main catalyst driving US government bonds higher. Federal Reserve Chair Kevin Warsh said future rate decisions will depend on subsequently released economic data rather than any preset hawkish path, and this statement also provided firm bullish support for short-term Treasury prices. Traders are closely watching the policy outlook. Although elevated energy costs have increased price pressures, both the Federal Reserve and the Reserve Bank of New Zealand held rates steady this week, and traders unanimously bet that the Bank of Japan will also follow the Fed and choose to stand pat. With the US midterm elections approaching, the bond market faces another looming risk. Investors are increasingly doubtful whether a possible renewed political gridlock in Congress can, as it has for decades, ease their concerns about the US fiscal trajectory. The day after the election, the US Treasury will release its quarterly refunding plan. The market believes this will set the stage for any major debt management policy adjustments. However, the market's focus remains on the technology stock selloff: investors are increasingly questioning whether massive AI spending can generate enough profit growth to justify current valuations. Andrew Ticehurst, senior rate strategist at Nomura Holdings in Sydney, said: "Persistent concerns about hyperscaler valuations, combined with the extremely disappointing latest results from Alphabet, Amazon, and Intel, are driving some safe-haven flows into the bond market." He said the bond rally could continue because "we do not think Warsh came across as particularly hawkish at the post-meeting press conference, and these AI-related concerns seem likely to persist." AI trade under pressure, US Treasury market quickly takes over: global capital flows begin repricing for cash flow certainty As AI computing power and semiconductor stocks are sold off, US Treasuries are once again demonstrating their portfolio hedging value. Technology investors are reassessing the payback period of massive capital expenditures, with some capital rotating into government bonds that offer higher liquidity and relatively certain debt-service cash flows. During the Asian trading session on October 30, the US Treasury rally continued, with the 10-year yield falling to about 4.90% at one point; Australian, Japanese, and New Zealand government bonds strengthened in tandem, reflecting that this round of safe-haven demand has spread beyond the US market. Bloomberg bond market statistics show that in early Asian trading, US Treasury yields fell by at least 2 basis points across maturities, while 10-year yields in Australia, Japan, and New Zealand each fell about 5 basis points. The US benchmark Treasury yield has fallen nearly 40 basis points cumulatively in October and is on track for its first monthly decline since February this year; meanwhile, the Bloomberg US Treasury return index has risen about 2% for the month and is on track for its best monthly performance since February 2025. The former measures yield changes, while the latter measures bond investment returns; together, the two sets of data point to the same conclusionUS Treasuries are absorbing strong safe-haven demand arising from the decline in risk appetite for technology stocks. The key to this round of asset rotation is that the market has begun to distinguish between "AI demand growth" and "the cash returns investors can actually obtain." From an industry mechanism perspective, cloud revenue growth must pass through server delivery, data center power supply, network interconnection, actual utilization improvement, and customer payment collection before it can be converted into cash flow that covers construction spending and financing costs. Strong orders for GPUs, HBM, and liquid cooling equipment can prove that construction demand exists, but cannot alone prove that the capital return of each project is sufficient to cover the cost of capital. As investors raise their requirements for cash flow realization, stock valuations and corporate credit risk compensation may come under pressure simultaneously, while government bonds receive safe-haven support. This also explains why technology stocks can fall while US Treasuries rise at the same time: what the market is reducing is trust in companies' forward earnings and financing capacity, while what some capital is increasing is allocation to government bonds. US Treasuries have restored their role as a hedge against equity drawdowns in this round of adjustment, but this protective capacity still depends on the source of the shockearnings and credit concerns are usually favorable for safe-haven buying, while a renewed bout of energy inflation could simultaneously depress stock prices and long-duration bond prices. US Treasury Secretary Bessent reassures on financing, but the market is still picking risks: can a Treasury rally lower AI costs? There is no necessary contradiction between Bessent's latest views and market trading. He emphasized that new cloud companies are only part of the AI ecosystem and that financing deals are still getting done, citing Meta's use of equity financing as an example to show that capital markets can still provide funding for construction. What this answers is "whether financing channels are still functioning"; what investors are assessing by reducing technology holdings and buying US Treasuries is "whether current prices are sufficient to compensate for earnings, cash flow, and credit risk." The completion of financing does not automatically mean financing is cheap, nor does it mean all projects can earn sufficient returns. From a financing mechanism perspective, the pricing of newly issued corporate bonds typically includes the benchmark rate of the same maturity plus risk compensation for credit, liquidity, and other factors. Therefore, a decline in US Treasury yields can lower the benchmark component of financing costs, but if credit spreads for companies such as CoreWeave widen faster, their overall financing costs may still rise. For cloud giants with abundant operating cash flow, the pressure is more reflected in the return threshold for new investment and equity valuation discounting; for new cloud companies reliant on continuous external financing, the pressure will also directly affect construction progress, equipment procurement, and refinancing capacity. A stronger US Treasury market may therefore first reflect capital seeking safety rather than a comprehensive improvement in the AI financing environment. The Fed's pause has provided room for bond buying but has not declared an end to tightening. On October 28, the Fed voted 10-2 to keep the federal funds rate target range at 3.75%4%, with two dissenters favoring a 25 basis point hike. Warsh acknowledged that financial and credit conditions facing some businesses and households have already tightened, while emphasizing that overall financial conditions still cannot be described as tight and that subsequent policy needs more information. This supports the judgment that "no additional aggressive hawkish signal that the market feared was released," but it is not enough to infer that rate cuts are imminent. Bessent's view on energy corresponds to another potentially more durable positive path: if geopolitical conflicts ease and oil supply becomes ample again, inflation and borrowing costs are expected to decline. He also said that another rate hike in the future would not necessarily constitute a policy mistake. Taken together, the two statements mean that the Treasury's optimistic expectations are mainly based on economic resilience and easing energy pressures, rather than relying on immediate monetary policy easing to support asset prices. For investment allocation, Treasury duration and corporate credit need to be judged separately: holding Treasuries allows investors to participate in price gains brought by falling yields, while buying AI corporate bonds also requires bearing the risk of further credit spread widening. In the next stage, long-end US Treasuries will also face fiscal expectations after the midterm elections and the issuance arrangements revealed by the quarterly refunding announcement on November 4. Safe-haven demand can support current bond prices, but long-term supply, the record pace of long-term fiscal deficit expansion, and inflation risks will still affect the term premium investors demand.