Higher Rates Could Burst the AI Bubble — Here’s What to Own Instead

Rising interest rates and persistent inflation signal a new tightening cycle, threatening to burst the speculative AI bubble that currently dominates market valuations. Jesse Felder, founder of the Felder Report, argues that the economy is running at its hottest level in decades, necessitating further rate hikes that will pressure consumers and growth-oriented companies. As capital flows tighten, the massive over-investment in AI infrastructure—driven by unsustainable data center expansion—faces a reckoning similar to the dot-com bust. Investors should pivot toward value stocks and real assets, such as gold and commodities, which historically outperform during inflationary regimes. Systemic risks, including potential accidents in the Treasury market’s basis trade and rising defaults in private credit, further underscore the need for defensive positioning as the market rotates away from financialized growth toward tangible, scarce assets.