US stocks ended lower on Monday as renewed concerns about the pace and safety of artificial intelligence development weighed on technology and semiconductor shares. At the same time, a sharp rise in long-term Treasury yields added another source of pressure to equity valuations, creating a more cautious backdrop ahead of the Federal Reserve’s policy meeting.

The session highlighted two increasingly important forces for global markets: the sustainability of the AI investment cycle and the cost of capital. With the 10-year Treasury yield reaching a level last seen in 2023, investors are reassessing the relationship between high-growth technology valuations, corporate spending and borrowing costs.

AI Warnings Hit Semiconductor Stocks

The technology sector was at the center of Monday’s decline after executives at major US artificial intelligence companies raised safety concerns surrounding increasingly advanced AI systems and called for a slower development pace. The comments challenged an investment narrative that has helped drive substantial capital expenditure across computing infrastructure, semiconductors and data centers.

Chipmakers were particularly vulnerable because semiconductor companies are directly exposed to the continuing expansion of AI computing capacity. Concerns that development could slow, even at the margin, can therefore affect expectations for future demand, capital spending and earnings across the technology supply chain.

The Nasdaq fell 0.56%, compared with a 0.48% decline in the S&P 500. The broader market weakness indicates that the session was not limited to a single technology segment, although AI-related companies remained an important source of selling pressure.

Rising Treasury Yields Create a Second Headwind

Equities were also affected by movements in the bond market. The 10-year US Treasury yield briefly exceeded 5% for the first time since 2023, reflecting growing concerns about inflation, interest rates and the supply of government debt.

Higher long-term yields can influence equity markets through several channels. They increase the discount rate applied to future corporate cash flows and make fixed-income assets comparatively more attractive. The impact can be particularly relevant for growth companies whose valuations rely heavily on earnings expected several years into the future.

The move in Treasury yields therefore adds a macroeconomic dimension to the AI-related selloff. Even if concerns surrounding AI development prove temporary, persistently higher borrowing costs could continue to influence corporate investment decisions and equity valuations.

Valuations Face a More Demanding Environment

The S&P 500’s price-to-earnings ratio also moved lower during the session, reaching its lowest level since April 2025, according to the Reuters report. While this does not by itself indicate that valuations have become inexpensive, it shows that market pricing is adjusting as investors reassess the earnings outlook and the cost of capital.

The Dow Jones Industrial Average declined 0.29%, demonstrating that weakness extended beyond technology-heavy benchmarks. The simultaneous decline in major indexes and rise in Treasury yields suggests that investors were responding to both company-specific concerns surrounding AI and broader macroeconomic uncertainty.

For international investors, including those in Israel, movements in US equities and Treasury yields remain significant because they influence global financing conditions, currency markets and valuation benchmarks. Changes in the US cost of capital can ultimately affect asset prices well beyond Wall Street.

Looking ahead, investors will closely monitor the Federal Reserve’s policy signals, the trajectory of the 10-year Treasury yield and whether AI-related selling spreads across the broader technology sector. Semiconductor demand, data-center investment and corporate AI spending will remain important indicators of whether the latest concerns represent a temporary reassessment or a more meaningful change in expectations. The interaction between elevated bond yields and continued AI investment will be particularly important in determining whether US equity markets can regain momentum or face a prolonged period of valuation adjustment.