Two clients asked me a version of the same question over the past few weeks, so I wanted to share our conversation with you all. Two weeks ago, the 10-year Treasury reached a multi-decade high of over 5.3%, then reversed and finished the week at 5.1%. What turned it around had nothing to do with inflation. Yields fell because of concerns about whether there will be enough revenue from the AI buildout to justify the spend. As this happened, long-term Treasuries had their best week in over a year. That week was a small preview of how hedging risk works.  

A big reason long rates are so high is the borrowing behind the AI buildout. If demand for bonds is limited, yields have to rise as supply increases for demand to follow. While nothing is guaranteed, it’s reasonable to think that if the AI trade breaks, growth expectations will come down, the Fed gets room to cut, and yields fall.  

A good hedge might be to own assets that benefit when rates fall: bonds, value stocks, international, real estate, among others…

Recently, I was meeting with a client who asked how sustainable the growth of the market is, and also about the earnings growth of these companies. The largest companies in the market (often referred to as the hyperscalers) are spending an enormous amount building out AI infrastructure. Investors rightfully want to know if these investments are well-spent money. Apollo published a chart recently that gets at this subject better than anything else I've seen. 

The chart tracks the hyperscalers’ operating cash flow, which is the actual cash the business throws off before big investments. It was at $600 billion in 2025, and consensus expects that to reach roughly $2 trillion by 2030…