The Robust U.S. Economy Powers Through Rate Hikes and Rising Bond Yields

The Wall Street Journal ^ | Sept. 24, 2026 9:00 pm ET | Matt Grossman and Sam Goldfarb

[E. Pluribus Unum]

AI-driven growth looks resistant to higher borrowing costs, spooking Treasury investors

The U.S. economy keeps powering through inflation, tariffs and higher borrowing costs, defying a run-up in Treasury yields and a Fed rate increase. That has the bond market spooked.

The usual economic brakes aren’t slowing growth, hiring or an AI investment boom that looks to be unstoppable. To some, AI’s potential returns seem so bright that even steep interest rates won’t slow down tech companies’ investments.

The growth outlook helps explain the current predicament in the bond market: The yield on the 10-year Treasury note, which plays a critical role in determining rates on mortgages and other types of debt, this week hit highs not seen in nearly 20 years, climbing again Thursday to almost 5.2%. 

Bond prices have sagged over concerns about surging energy prices and elevated inflation. Treasurys are facing more competition for investors’ cash from an explosion of bonds issued by companies involved in the AI build-out. Strong economic data are also pushing up yields by stirring speculation that the Fed may have to raise rates even higher than previously expected to cool a potentially overheating economy.

And any Fed struggle to restrain the economy raises the risks of a misstep that does broader damage.

Reinforcing that concern, some economists worry that borrowing costs that continue to climb may do less today to slow the economy than they have in the past, potentially requiring an even bigger Fed response. The AI boom could provide kindling, as more of the benefits could ripple out to other parts of the economy, said Eric Winograd, an economist at...

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TOPICS: Business/Economy
KEYWORDS:

[Mariner]

This won’t last.

It will end as all bubbles do.

[Brian Griffin]

If AI borrowing was limited, then maybe Treasury and mortgage rates might fall.

I have to eat and run, so suggestions on how to do that would be appreciated later in the day.

[FlipWilson]

I don’t know how to reply to the “this won’t last” argument. Yah, nothing last forever. And your point somehow makes this good news bad?

[rlmorel]

I understand why Trump is waging war on the Fed: all those intellectuals (probably disciples of John Maynard Keynes except for perhaps the Chairman he pushed to replace the execrable Jerome Powell (Kevin Warsh) and I admit, I am having difficulty figuring him out) likely want to keep the rate higher because they are inclined to do that, but also just to stick it to Trump. That wouldn’t surprise me a bit.

We are paying $3 Billion dollars A DAY just to service the interest on the debt. That is wasted money. Money we are just throwing down the drain. That is going to be over a trillion dollars in the course of one year.

We need to get the Fed Rate reduced to 3% or less, and that will save a LOT of money we are just throwing away. It is unsupportable.

[No.6]

With a correction and more long-term growth, as has been the pattern since the 1930s? (https://historyofmarket.com/articles/sp500-annual-returns-by-year)

Ohnoes doom doom. Quicherbichen.

[central_va]

It’s not AI driven . The good economy is built on solid MAGA economics of tariffs and reshoring of industry. If anything AI is a drag and is losing money.

[citizen]

I don’t claim an understanding of macro-economics, but if a roaring economy is deemed a bad thing, something is amiss somewhere. I think too many of the big investors only see an “on paper” world RE profits and so forth, caring little for the tangible well being of Main Street jobs, companies & industries, except as it relates to their portfolios.

My view of the FED governors is there are still too many Powell adherents, made worse in that many are also Dumocrat Trump haters all too willing to cut off their nose to spite their face...meaning Main Street can be damned as long as Trump & Rs lose the midterms.

They want to get back to the former business-as-usual control that Trump has been fighting against.

[citizen]

I don’t claim an understanding of macro-economics, but if a roaring economy is deemed a bad thing, something is amiss somewhere. I think too many of the big investors only see an “on paper” world RE profits and so forth, caring little for the tangible well being of Main Street jobs, companies & industries, except as it relates to their portfolios.

My view of the FED governors is there are still too many Powell adherents, made worse in that many are also Dumocrat Trump haters all too willing to cut off their nose to spite their face...meaning Main Street can be damned as long as Trump & Rs lose the midterms.

They want to get back to the former business-as-usual control that Trump has been fighting against.

[Alberta's Child]

You have it all wrong. The U.S. Treasury rates reflect the financial health of the U.S. government. Investors are basically giving a “no confidence” vote in Congress and this administration.

The Federal Reserve could reduce its Federal Funds Rate to 0.1% tomorrow, and the 10-year Treasury bond would still be commanding a rate north of 5%.

[voicereason]

The good economy is built on solid MAGA economics of tariffs and reshoring of industry.

I guess if enough people keep telling themselves that it's good, it may very well be true.

The problem is that there does seem to be a disconnect: Dollar General CEO raises major red flag about consumers.

And he isn't the only one mentioning they are seeing buying and spending habit changing.

It's interesting that we have people that will point to financial markets and proclaim all is well, and then we have people claim that the financial markets aren't a true representation of the state of the economy.

As for AI, I do think that's a bubble just waiting to pop. Maybe not immediately, and I won't dare to guess when. But like telecom, it's likely, and will be even uglier. Based on the latest news, Oracle’s $18 billion syndicated loan for its Project Jupiter AI data center in New Mexico is trading at 89–91 cents on the dollar, cutting its market value to about $16–$16.4 billion, a nearly 10% discount.

As a singular summary, probably not that big of a deal. But then we start to see articles outlining items such as:

In July 2026, S&P downgraded Oracle from BBB to BBB‑, just one notch above junk, amid rising borrowings and investor concerns.
*Banks, including Santander and Jefferies, are retaining more Oracle‑linked debt than planned because institutional demand has weakened.

So while it isn't a default, some are starting to recognize that the risk profile is increasing.

I just really don't see how anyone can trust the numbers being reported by the government. We know the various reporting agencies have lied in the past and/or pushed an administration's agenda. Trump isn't immune to that either. If nothing, he's probably more likely to bend the numbers to his favor because his ego is just too big.

But hey. If people want to go out and make major purchases (except they aren't: homes, cars, etc.) because they think the good times are here, then it just proves freedom is a beautiful thing.

[cymbeline]

I’m still trying to learn the machinery underlying AI. Nvidia makes a large family of chips and plug-in modules. Looks like they are all video accelerators.

So, to what extent is AI devoted to realistic, non-real video?

If someone knows more, please speak up.

[Unassuaged]

I case you are interested in Co-Pilot might say:

Based on the surrounding discussion, the commenter is misunderstanding what Nvidia’s AI chips actually do.

The page is discussing an AI investment boom and why companies are spending enormous amounts of money on AI infrastructure despite high interest rates. The commenter then asks:

“Nvidia makes a large family of chips and plug-in modules. Looks like they are all video accelerators. So, to what extent is AI devoted to realistic, non-real video?”

What the commenter is assuming

The commenter sees that Nvidia originally became famous for graphics processing units (GPUs), which were designed to accelerate video games and 3D graphics. Since GPUs are associated with graphics, they infer that AI must primarily be about generating realistic fake videos.

What the surrounding article implies

The article is talking about a broad AI investment boom affecting the economy, bond market, and corporate borrowing. The investment is not mainly for creating fake videos. Instead, companies are building enormous computing infrastructure because GPUs are exceptionally good at the mathematical operations required for AI training and inference.

Why Nvidia GPUs are used for AI

A GPU is not just a “video accelerator.” It is a processor capable of performing thousands of calculations in parallel.

AI systems use that capability for:

Training large language models
Running chatbots
Image recognition
Speech recognition
Scientific computing
Drug discovery
Robotics
Autonomous vehicles
Recommendation engines
Generative AI (including images and video)

Video generation is only one application among many.

Answer to the commenter’s question

A concise response would be:

Only a small portion of AI spending is devoted to generating realistic fake video. Nvidia’s AI hardware is used because it excels at large-scale parallel math, which is needed for almost every modern AI workload. The same chips used to create images or videos are also used to train language models, analyze medical images, predict protein structures, optimize logistics, run search engines, and power AI assistants. The hardware originated in graphics, but AI has become its dominant growth market.

So the commenter is correctly noticing that Nvidia’s roots are in graphics hardware, but incorrectly concluding that AI is therefore mostly about video generation. The article’s broader point is that investors are funding a massive build-out of computing infrastructure for many kinds of AI applications, not just realistic synthetic video.

[E. Pluribus Unum]

I’m still trying to learn the machinery underlying AI.

Deep Learning with PyTorch Step-by-Step: A Beginner's Guide

[Antoninus]

This won’t last. It will end as all bubbles do.

Imagine doom-posting this excellent news.

When was the last time the US posted 5.2% GDP increase? If you take out the ridiculous artificial COVID swings, the last time was 2014.

Try being positive for 10 minutes. It will change your life.

[central_va]

I judge a good economy on GDP and jobs. Consumption is downstream of that.

[voicereason]

I judge a good economy on GDP and jobs.

And you are well within your rights to do so.

[piytar]

I’ve always found the concept that the Fed raises interest rates when the economy heats up to fight inflation to be utter garbage. The Fed raises interest rates when the economy heats up for one and only one reason: to bilk more money out of us because there is more to take. That’s it. Period. The Fed doesn’t give a hoot for us. We are just sheep to be fleeced.

[Chad_the_Impaler]

The fiscal situation in the US contributes to the level of interest rate, but the national debt is increasing in a steady and fairly predictable fashion. So, what has changed? AI-related borrowing. AI data‑center construction is extraordinarily capital‑intensive, estimated at $3–5 trillion over 3–5 years, and firms are increasingly financing this with long‑term debt rather than retained earnings.

And long term interest rates are up world-wide. For example, interest rates have increased in South Korea, Japan, Australia, and France even more than the US. And, almost as much in every other European country. Global investors demand higher yields everywhere to stay compensated for holding non‑U.S. bonds.

[Mariner]

Many prefer to look the other way and cheer.

But there’s a reason Berkshire Hathaway has socked away $365billion in cash and equivalents. Over 55% of their holdings.