Wall Street's artificial intelligence enthusiasm is helping technology stocks withstand a surge in interest rates that would normally pressure equity valuations, Bloomberg News reported Sunday. The 10-year Treasury yield recently topped 5.3% and the 30-year yield reached 5.69%, their highest levels since 2002, yet the Nasdaq 100 closed at a record Friday and has gained 22% this year, while the S&P 500 is less than 1% below its August record. Investors are betting strong earnings growth will justify elevated tech valuations, with third-quarter earnings per share for the tech sector projected to rise more than 65% and overall S&P 500 earnings expected to increase more than 24%, according to Bloomberg Intelligence. The AI investment boom is also changing company financial profiles: Alphabet, Amazon and Meta have seen annual free cash flow turn negative as data-center and AI infrastructure spending accelerates, and those companies plus Microsoft and Oracle increasingly need outside financing, per Bloomberg Intelligence. Higher rates are already taking a toll elsewhere, with the S&P 500 trading at less than 19 times projected earnings, down from more than 21 times in May, and some strategists see a 10-year Treasury yield approaching 6% as a level that could materially change the outlook for equities.
Apple Inc.
Amazon.com Inc
Alphabet Inc Class C
Microsoft Corporation
NVIDIA Corporation
Meta Platforms Inc.
Oracle Corporation