The Nasdaq Composite fell 1.3% on Friday and the S&P 500 lost 1%, closing out a week of tech weakness. 10-year Treasury yields ticked past 4.4% after Tuesday's hotter April CPI print, with rate-cut probabilities for September continuing to compress. The selling concentrated in semiconductors and the largest mega-cap names, with the iShares Semiconductor ETF down another 2.1% on Friday on top of Tuesday's 3% drop.
4.4% on the 10-year is the number that matters. The AI infrastructure trade has been running on a low-yield assumption baked into duration math. Investors price multi-year revenue streams (Cerebras's RPO, Microsoft's AI ARR, hyperscaler capex returns) against a discount rate that has been trending lower since 2024. Tuesday's CPI moved the rate-cut expectation for September from 78% to 54%; Friday's yield move reflected that repricing being absorbed by the long end of the curve. The mechanical effect on tech multiples is roughly 30 basis points of multiple compression for every 50 basis point yield move in the AI-exposed names, which lines up with this week's sector moves. The structural question is whether the rally pauses here or whether yields keep moving. A 4.6% 10-year sustained for a quarter would force a real conversation about whether $700B+ in committed 2026 AI capex still pencils at higher hurdle rates. Below 4.5%, this remains a positioning shake-out.
For tech-heavy portfolios: the AI thesis is intact at 4.4% yields. At 5.0% it isn't. Watch the 10-year auctions and the next two CPI prints for the signal that determines whether this week's selling is the bottom of a consolidation or the start of a re-rating.