S&P 500 Divergence and Treasury Yield Plunge Signal AI Bubble Anxiety on Wall Street

Wall Street flashed rare warning signs as the market-value-weighted S&P 500 fell 1.2% while the equal-weighted index gained 0.5% on October 22 — a divergence seen only twice since 1995, in April 1999 and March 2000, according to Capital Economics' James Reilly. The same day, the 10-year Treasury yield fell below 5%, its largest single-day decline since March 10, 2023. Investors pulled money from tech and into Treasuries and non-tech stocks at a historic pace, driven by anxiety over AI-related debt. CoreWeave's borrowing costs ballooned to roughly 15% this month, while Meta spent $2 billion more cash than it produced in the third quarter, sending its shares down 7% Thursday. Meanwhile, America's debt has reached $40 trillion and the budget deficit hit $2 trillion over the past fiscal year, with AI infrastructure requiring roughly $1 trillion annually. "What we're seeing is elevated volatility around something that looks and feels and smells like a bubble," said Joe Brusuelas, chief economist for RSM US. The Nasdaq has slid 6% over two weeks, though prior AI-spending scares have reversed when demand held.