Why has the bond market suddenly become more important than Nvidia?

The AI ​​rally that sent Wall Street to record highs is running into a growing threat from the bond market, with Treasury yields now rising fast enough to challenge the extreme valuations driving Nvidia and the broader tech sector.

“If 10-year Treasury yields keep trending toward 5%, investors will end up paying 30, 40 or 50 times earnings for growth stocks,” says Nigel Green, CEO of .
Deavere GroupOne of the world’s largest independent financial advisory organizations.

“This is where the pressure on AI evaluation becomes more severe.”

The S&P 500 has gained about 12% since April’s temporary Middle East ceasefire has reinvigorated risk appetite, with index performance dominated primarily by Nvidia and a narrow group of AI-linked megacaps.

Also, US 10-year Treasury yields rose to their highest level in more than a year as investors increasingly reassess inflation risks associated with oil above $100 a barrel and expect interest rates could remain high for longer.

“Wall Street has convinced itself that AI can overtake interest rates,” says Nigel Green.

“Bond markets are now challenging this in a serious way.”

Oil prices hovering above $100 a barrel following the disruption over the Strait of Hormuz has raised fears that inflationary pressures are resuming in the global economy.

One-year, one-year inflation swaps, a key market measure of inflation expectations, have now climbed above 4% for the first time since the start of 2025, raising concerns inside bond markets that central banks may struggle to get inflation fully under control.

Markets that had aggressively priced in a Federal Reserve rate cut just a few months ago are now rapidly moving in the opposite direction.

“AI trading works best in a falling rate environment,” explains Deavere’s CEO.

“Bond markets are suddenly pointing in the opposite direction.

“Markets that have priced in an aggressive rate cut from the Federal Reserve for months are now rapidly reversing those expectations.”

It is becoming increasingly difficult for investors to ignore the implications of the broader AI sector.

High-growth technology companies are particularly sensitive to rising Treasury yields because much of their valuations depend on expectations of future earnings. As bond yields rise, the discount rate applied to future profits also increases, reducing the present value investors are willing to pay for expensive growth stocks.

Nvidia has become the clearest symbol of the concentration driving the current market rally.

Explosive company gains have helped drive U.S. equity indexes to repeated record highs, while a relatively small group of megacap tech stocks now account for a disproportionate share of overall market performance.

Nigel Green has warned that the risk of concentration in US equities is becoming increasingly dangerous.

“Nvidia is now acting almost like a macro asset rather than just a semiconductor company,” he confirmed.

“When one theme and a handful of stocks are taking up such a large percentage of market momentum, any revaluation in yields can impact the broader market very quickly.”

Pressure within bond markets is also continuously increasing globally.

Government borrowing costs have risen sharply in developed economies as investors reassess the outlook for inflation, central bank policy and fiscal spending. Markets that had spent months pricing in rapid monetary easing now face the prospect that rates will remain high for a long time.

History teaches us that major market corrections are often preceded by volatility in fixed income markets rather than equities.

Bond investors react first to inflation risks, tight liquidity conditions and worsening fiscal dynamics. Equity markets often adjust later – and often aggressively.

Nigel Green says investors focusing only on AI earnings momentum are missing the broader macro shift underway.

“Cheap money has been one of the foundations of the explosive move in AI stocks,” he concludes.

“If yields continue to rise rapidly while oil remains high, the risk increases that bond markets – not earnings – will become the catalyst for the next technical selloff.”

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