Fidelity’s Jurrien Timmer says the Goldman Sachs AI basket is down 22% since early June, and its link to long-term Treasuries has turned negative, which could make bonds a hedge in the AI selloff.

Holders of concentrated AI positions face a test if support around 357 fails, but the bond cushion has limits. It works when yields fall on growth fears, not when inflation pushes them higher.

Why Did Treasuries Start Rising as the AI Selloff Deepened?

The basket tracks AI-linked stocks, and its drawdown dates to an early-June chip selloff that cut the Nasdaq Composite 4.2% in one session.

The slide deepened on October 22, when the Nasdaq fell 2.6%, its worst session since early June, Reuters reported. Meta Platforms (META) lost 7% after lifting its capital spending forecast and unveiling non-voting shares, while the Philadelphia Semiconductor Index dropped 6.7%.

The GS AI basket is now sitting on support after a 22% drawdown since early June. As the bottom panel below shows, that drawdown has led to a negative correlation between bonds and the AI/ex-AI pair. 🧵(1/2) pic.twitter.com/UhKiD0vAjT

— Jurrien Timmer (@TimmerFidelity) October 27, 2026

Money moved into bonds, and the 10-year yield fell to 4.96% from 5.13%, its first close below 5% since September 22, based on Treasury curve data.

Fidelity’s chart, with data through October 25, puts the 20-day correlation between AI and non-AI stocks and the Bloomberg long-term government bond index at negative 31%, meaning the two move in opposite directions.

That sits near the negative 33% low of the early-2025 Tariff Tantrum, Timmer’s label for the tariff selloff. However, December 2025 touched negative 37%.

The 50-day view is also negative against Treasuries, while the pair stays positively correlated with the S&P 500.

Can Bonds Keep Cushioning AI Losses?

Still, the rebound looks fragile. Chips rose 2.8% on October 26 after Anthropic filed to go public, yet the index remains down 12.2% this month, Reuters reported.

The Federal Open Market Committee (FOMC) ends its two-day meeting on October 28, and Personal Consumption Expenditures (PCE) inflation data lands October 29. Markets priced about a 78% chance of a December rate hike on October 22, 24/7 Wall St. reported.

A 10-year close above 5.13% would erase the bond rally. In August, bonds slammed stocks lower as 30-year yields reached a 19-year high.

The cost of insuring Meta’s debt also hit a record on October 22, tying AI spending to credit markets.

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