The feast of artificial intelligence is in full swing, while Wall Street closely monitors interest rate risks that could stir up trouble.

Investor enthusiasm for large technology companies and their massive investments in artificial intelligence has once again driven the stock market to new historical highs. Against a backdrop of robust economic resilience and strong demand, this wave of rising markets seems to face just one obstacle: rising interest rates. Tech companies have historically been very sensitive to U.S. Treasury yields, as their high market valuations are based on growth expectations, hoping that one day they will achieve higher profits. This is particularly true for capital expenditures related to artificial intelligence, as these investments are expected to take years to fully realize returns. In this forward-looking equation, interest rates determine the level at which Wall Street discounts future profits into current value. Essentially, if rising inflation drives interest rates up, the present value of those future earnings will decline, leading to selling pressure on stocks. Stocks with high valuation multiples typically face sell-offs when interest rates rise, said Maria Llerena, head of financial research at Domini Impact Investments.