One market-moving event. The stocks positioned to benefit
Expenditure on AI infrastructure is now on such a scale that the borrowing is shaping the entire credit market, and triggering rising bond yields that threaten the valuations of growth stocks themselves.
With institutional firms building short positions in the Nasdaq index, it’s time for investors holding AI and other growth stocks to establish whether they are willing — and able — to navigate the likely turmoil. The alternative is to tactically reallocate capital to positions designed to minimise P&L volatility and preserve firepower to seize opportunities.
The question of how AI firms balance their books refuses to go away. Total capital expenditure in the sector is due to grow by 70% this year and could top $1trn. In comparison, operating cash flows are growing by only 23% per annum.
Those numbers highlight the continued limitations on immediate monetisation of AI services, and how the rollout of data centres and chip purchases is being financed by debt. Issuance of investment grade corporate bonds by the five biggest AI companies jumped from $17bn in 2024 to more than $200bn in just the first six months of 2026.
While the contribution of AI might be groundbreaking, the inverse relationship between bond yields and growth stock valuations is tried and tested. Like other growth sectors, AI stock prices are particularly sensitive to the fact that a dollar of future profit is worth less when risk-free cash yields a premium today.
This has not gone unnoticed. Hedge funds are reported by Macro Charts to have built their largest-ever net short position — $18bn net short and climbing — in Nasdaq 100 futures. That is not only a big number, but a significant pivot from the long positions many of the same firms held earlier in the year.
Stocks to Navigate Rising Bond Yields
Tactical asset allocation offers an alternative to retreating into non-yielding cash or riding out a prolonged growth drawdown. That involves identifying high-conviction entities characterised by immense pricing power, structural insulation from rate hikes, or businesses that physically thrive under higher wholesale interest rates.
Below are four stocks uniquely positioned to weather, and potentially benefit from, the current situation.
1. Berkshire Hathaway (BRK.B) — The Ultimate Cash Fortress
Berkshire Hathaway sits on a historic cash mountain primarily parked in short-duration US Treasury bills. As short-term interest rates hover at elevated levels, Berkshire generates billions in risk-free interest income out of thin air. Its diverse portfolio of infrastructure, insurance and energy companies also boasts massive pricing power, acting as an exceptional hedge against broader corporate margin degradation.
2. JPMorgan Chase & Co. (JPM) — Net Interest Margin Expansion
While high borrowing costs squeeze tech companies, they act as an organic earnings driver for tier-one financial institutions. JPMorgan Chase, the premier global banking powerhouse, is positioned to capture immediate fundamental upside. Higher long-term yields allow the bank to price loans at significantly higher rates while keeping deposit costs relatively sticky, triggering substantial net interest margin expansion.
3. Lockheed Martin (LMT) — Inelastic, Non-Cyclical Demand
Technology stocks rely heavily on consumer discretionary spending and cheap corporate credit, both of which shrink as yields rise. Lockheed Martin operates a highly insulated business model anchored by massive, multi-year government defence contracts. Its cash flows are decoupled from traditional economic cycles or monetary tightening, offering institutional investors a highly liquid, fundamentally secure alternative to growth equities.
4. ExxonMobil (XOM) — High-Yield Commodity Tailwinds
A surging yield environment often coincides with sticky structural inflation or hot economic data. ExxonMobil provides an excellent equity proxy for real assets that naturally benefit during these macro phases. Characterised by low debt levels and massive free cash flow generation, it rewards shareholders via aggressive stock buybacks and rising dividends, directly contrasting with the capital-consumptive nature of unprofitable tech companies.
5. AI Stocks
The hard choices facing investors are driven by a paradox, that the uncertainty about short-term valuations is based on the unwavering conviction of lenders who are willing to bankroll longer-term potential.
Developing the logic even further introduces the argument that AI stocks could themselves be worthy of being placed on a watchlist. At some point there could be opportunities to take advantage of a potential shake-down and to buy the dip. But that’s different from just holding on while stock prices tumble, and may be best served by initially rotating into lower-risk positions.
What to Watch
Price charts and volume
