AI buildout giving tech investors new reasons to watch bond market

Artificial intelligence is giving tech investors an entirely new reason to pay attention to the Federal Reserve.

For years, megacap tech companies with hefty balance sheets have been able to shrug off rising rates, which tend to weigh more heavily on smaller, less-profitable peers.

But companies that were once cash cows are depleting reserves and leveraging debt in their ambitious data center buildouts. That’s making the group much more exposed to the cost of borrowing.

“Tech investors are not as used to looking at rates,” Peter Boockvar, chief investment officer of One Point BFG Wealth Partners, said in an interview. “All of a sudden tech investors need to listen to what Kevin Warsh has to say, they need to start paying attention to what the inflation stats are and how the U.S. Treasury market responds to it.”

Warsh held his first press conference as Fed chairman on Wednesday. The central bank indicated the possibility of a rate hike in 2026, which sparked a sell-off in equities and an increase in rates. The 10-year yield is trading near 4.45%.

Higher rates have always had an outsized impact on smaller tech companies, as investors value them based on future profits. When yields spike and the so-called “risk-free rate” rises, investors discount future cash flows, making them worth less today.

The effect of rising rates is now moving upstream. That’s because tech’s hyperscalers are engaged in a high-speed race to build out AI infrastructure, with Amazon, Alphabet, Microsoft and Meta projected to deploy a combined $750 billion this year, up more than 80% from 2025.

The Amazon Web Services IAD10 data center in Sterling, Virginia, US, on Sunday, May 31, 2026. NextEra Energy Inc. agreed to pay about $67 billion in

Lexi Critchett | Bloomberg | Getty Images

A big piece of that expansion is being funded by debt, which becomes a more difficult sell if rates are rising. Nvidia, Oracle, Amazon, Alphabet and Meta are turning to the debt market to the tune of tens of…

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