The AI rally is officially wobbling. For the first time in years, the trade's mechanics are changing, and growth at all costs is no longer rewarded. With the 10-year Treasury yield above 5% and markets projecting another interest rate hike in December, borrowing costs are becoming a bigger concern, even as the AI buildout grows more reliant on debt.
Companies in the AI ecosystem are starting to ask two age-old questions: who’s paying for all this, and how much will the capital cost? For example, Meta Platforms Inc. (NASDAQ: META) beat its Q3 estimates handily on Oct. 21 but also reported its first negative free cash flow quarter as a public company as AI expansion costs skyrocketed. The stock lost nearly 7% the following day, erasing all year-to-date (YTD) gains.
