US Stock Valuations Under Pressure as Bond Yields Rise, AI Infrastructure Investments Continue

US equities are stabilizing after last week's tech-led sell-off, but bond market warnings persist. As long-term US Treasury yields climb, the S&P 500's earnings yield has failed to keep pace, narrowing the equity risk premium and underscoring rich valuations. The S&P 500's latest earnings yield stands at 4.95%, below the 30-year Treasury yield of 5.0685%.

SpaceX (SPCX-US) has lost over $1 trillion in market value since its peak a month ago, slipping in the US corporate rankings. According to Dow Jones market data, SpaceX was overtaken by Meta Platforms (META-US) on Monday, falling to the eighth-largest US company by market cap. Last week, it was surpassed by Broadcom (AVGO-US) for the first time, with its share price already below its IPO level.

AMD (AMD-US) rose 1.6% on Monday after Rosenblatt and UBS both raised their price targets. Additionally, Microsoft (MSFT-US) announced it will adopt AMD's upcoming Helios rack-level AI platform to power AI workloads on its Azure cloud services.

The AI infrastructure investment wave continues. BlackRock (BCS-US) is leading a debt financing deal of at least $12 billion to fund Meta Platforms' large-scale data center project in El Paso, Texas, according to sources cited by The Wall Street Journal. This underscores the trend of major financial institutions pouring capital into AI infrastructure.

However, AI stocks may be losing favor. A recent Goldman Sachs (GS-US) report reveals that hedge funds have been reducing US tech stock exposure at the fastest pace on record over the past two months, signaling cooling investor sentiment toward AI infrastructure names. Goldman Sachs' Prime Services notes that tech stocks have seen net outflows in six of the past eight weeks, with holdings shrinking by approximately 10%—the largest drop in over a decade of tracking.