Potential Exit of Capital Providers if U.S. 10-Year Treasury Yield Exceeds 5%

A recent analysis suggests that the risk signal in the AI investment cycle lies more in the liquidity changes of capital providers than in the suspension of investments by big tech companies. On the 18th, Lee Eun-taek, a director at KB Securities, stated during a press conference that while big tech may not be able to halt AI investments, capital providers might. He explained that the flow of AI facility investments has entered its later stages, and the attitude of those providing funds is the next point to watch. Lee pointed out that doubts about the sustainability of AI facility investments have increased following the decline of AI and semiconductor-related stocks. He believes that while the possibility of big tech halting investments is low, capital providers could stop. The investment ratio of capital providers in AI is estimated to be 60:40, and while companies find it difficult to easily withdraw from investments due to technological competition, capital providers consider the risk of principal loss more directly. Interest rates were presented as a key variable, with rising rates identified as the most significant risk factor for capital providers withdrawing funds. Lee warned that if the yield on 10-year government bonds exceeds 5%, capital providers may revert to securing safe returns. This indicates that the AI investment cycle should be viewed in conjunction with credit and funding conditions.

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