Global bond markets experienced a rally on Thursday as investor concerns about the financial health of the artificial intelligence (AI) sector prompted a flight to safety toward sovereign debt, particularly U.S. Treasuries and German Bunds. Ten-year U.S. Treasury yields declined by as much as 0.15 percentage points to 5.04%, marking a three-week low, before settling at 5.09%. This shift reversed months of selling pressure in bond markets.

The move came despite stronger-than-expected U.S. inflation data released earlier in the week, which would usually exert downward pressure on bond prices. Ales Koutny, head of international rates at Vanguard, observed that although inflation figures had shown notable increases, the market’s risk aversion dominated the response, outweighing inflation concerns.

Market participants pointed to a sell-off in chip stocks and worries over the debt used to finance data center expansion as primary factors unsettling investors. The correction in technology-related equities followed a period of rapid infrastructure investment that has supported U.S. economic growth and buoyed Wall Street indices throughout the year.

The Nasdaq 100 index dropped by 0.7% in early trading, with key tech sector stocks falling by 1.5%. Among the hardest hit was ASML, a major Dutch semiconductor equipment company and one of Europe’s largest corporations, which fell more than 4%. Shares of CoreWeave, a provider of AI computing infrastructure, declined 2.3% on the day and have lost over 20% for the week.

According to Hank Calenti, global markets strategist at SMBC, the sell-off reflects concerns tied to underlying business models within parts of the AI ecosystem rather than broader market trends. He noted that investors are increasingly anxious about the vulnerabilities within the sector and where financial strain may emerge.

In Europe, ten-year German Bund yields also decreased, closing down 0.06 percentage points at 3.41%, as the demand for safe-haven assets extended globally. Analysts also highlighted that the recent bond rally was partly driven by the unwinding of heavy negative positioning against government bonds that had accumulated since the onset of geopolitical tensions associated with the Iran conflict in late February.

Overall, the bond market rebound reflects a cautious reassessment among investors, balancing persistent inflationary pressures against growing uncertainty about the sustainability of the AI-driven infrastructure boom and its financing mechanisms.