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.
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.
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.