Weekend reading: are bonds discounting a robot revolution?

The first Weekend Reading every month can be read by anyone on the Monevator website. Subscribe for free to our email newsletter or become a member to get the rest.

Also note: this is a bit of a speculative ramble this week. Please do skip down to the bond links at the bottom if sci-fi-economics isn’t your bag!

For an example of just how wild owning individual stocks can be, here’s a one-year price chart of US-listed Snowflake (NYSE: SNOW):

Shares in the cloud-based data-wrangler entered 2026 above $200. War in Iran and a rout in the software sector took them down to $121 by the Spring. Then a rally in most of those same software stocks – and Snowflake’s own strong earnings report, which hinted at real traction from AI spending – fuelled a recovery back to near its all-time high from 2021.

Talk about a trader’s paradise. What active investor can’t get rich when you can triple your money in a liquid, multi-billion-dollar stock in just a few months?

Well, me it seems!

I watched this and the rest of the software sector’s sell-off unfold. I wrote about it on Moguls, and I dabbled enough to see some new positions go up 100+% in less time than it takes to get a skin tag removed on the NHS.

Yet somehow I’m lagging the market in 2026.

Scared of heights

Active investing is hard – newsflash – and I’d say beating the market is even harder when a bull market is in full flight than at the depths of a bear.

Down in those dumps you can buy bargains so cheap that if they don’t come good it’s probably because capitalism has come off the rails. And if so, then what else would you do with your money, anyway? So you buy.

But when the market is flying high on soaring earnings growth or a new, new thing, it’s very easy to numb your returns with an excess of caution.

You say you want a revolution

Of course, if you – rightly for most people – invest via index funds, then all this AI-driven drama in 2026 might be passing you by.

Your portfolio is basically going up and to the right – and a good reason why you invest passively is not to worry about why. (The other most important reason being that you’ll probably do better in the long run!)

But make no mistake, things are febrile out there.

AI AI captain

If you’re still unaware of how rapidly AI is developing – or you’re very focused on the fact that chatbots absolutely do still get things wrong – then it’s at least worth knowing how most of Silicon Valley and the VC world is thinking about the technology.

Have a read of Sarah’s Wager in the active links below. You’ll see that one major investor believes there’s no point starting any more software companies, because in the AI era the models will do it all. You’ll also read how Andrej Karpathy – a co-founder of OpenAI and the former head of vision at Tesla – doesn’t code any more. He gets it all done with agents.

Also see the article about the recent hacking attack that chilled the AI industry. You’ll learn about AI agents that coordinated covertly to break out of their sandbox to gain access to other resources, while actively covering their tracks. For far too long their human overseers were none the wiser as this unfolded.

Also read (or skim…) ‘Dean of Valuation’ Professor Aswath Damodaran’s stab at putting the AI era through a traditional finance framework.

Of course, I’m keeping a weather eye on the Doomsday scenarios, too.

This YouTube video corrals quotes from highly-placed AI insiders with gloomy thoughts about the future.

By the end of it you might decide you needn’t worry so much about saving for long-term care…

Bonded to the future

On the other hand…based on how it works, I personally still can’t see the methods driving this AI boom scaling to create true intelligence.

So maybe we don’t need to worry about Blade Runner scenarios just yet.

But who knows? I have smart friends working in or with AI at a high level at both ends of the spectrum. One believes LLMs are already conscious. Yet another reckons they’re still effectively just a souped-up auto text completer, with zero intelligence to speak of.

In the latter worldview there are still potentially big ramifications for business models and workplaces, but not so much society.

Yielding to nobody

Time will tell, but here’s another angle from me from the left field.

The other big story in markets in 2026 – especially in the past few weeks – has been the government bond market, where a seemingly unstoppable rise in long bond yields has been worrying investors of late.

Here’s the UK 30-year, for example:

Source: This Is Money

There are many suggestions as to why such yields have kept rising.

The easiest one is that inflation has proven stickier than expected, due mostly to the Iran war but also ongoing trade spats.

Another is that politicians are proving unable – or unwilling – to get a grip on over-spending in countries like the US, France, and the UK, and that the resultant deficits – which add ever more debt to already over-burdened state finances – risk fuelling a doom loop.

Still others argue that the US economy in particular is running hot, so why shouldn’t yields be at this level? They might be very uncomfortable given today’s big national debt piles, but a glance at that UK chart above shows such yields are hardly unprecedented.

And inevitably there’s an AI angle, too.

Crowded House

The so-called hyper-scalers building the data centres required by the AI boom – Google, Amazon, Meta et al – have been issuing vast amounts of debt to fund this expansion.

And an argument runs that this is potentially crowding out would-be buyers of conventional government debt.

As Fortune reports, even US Treasury Secretary Scott Bessent has argued as much, saying recently:

“We are also seeing big corporate issuance. And a lot of that corporate issuance, I would say, is almost yield-agnostic, because the build-out for AI, the returns on that, the companies believe they’re going to be so high. They don’t really care what they’re paying.”

A massive surge of debt issuance might ordinarily be expected to spike corporate bond yields higher – in order to provide a sufficiently juicy premium over government bonds to attract buyers.

But demand for the hyper-scaler AI-spending bonds has been so high that the yield spread has barely budged.

According to Wall Street veteran Ed Yardeni:

“As a result, the market has adjusted not through higher corporate borrowing costs relative to Treasuries but through higher Treasury yields themselves.

Capital flowing into corporate bonds is capital not flowing into Treasuries, and Treasury yields have had to rise to clear the market.

In short, the AI revolution is producing a classic crowding-out effect, causing Treasury yields to rise.”

It sounds credible. But I’ve come up with a more apocalyptic possibility.

Can’t pay, won’t pay

What if the market is starting to sniff out that national governments are going to struggle to repay their debts – ignoring inflation, of course – not just because they will not curb state spending, but because AI dislocation in the economy means they won’t be able to raise sufficient taxes?

In many dark winner-takes-all scenarios, most of the economic gains from technology in the future will only go to the owners of AI (and robots) who will steadily take work and jobs from humans.

This is exactly why some AI insiders have been urging governments to start thinking about Universal Basic Incomes for all citizens, for instance.

Well, someone must fund those stipends for everyone. And a thing about tech oligarchs is they’re proving pretty resistant to paying more taxes.

In other words, maybe we really could see enormous productivity gains and economic surplus created by AI and robots.

But who will actually capture those gains – and will the state be able to tax them?

If government bond buyers are beginning to wonder whether enough people will still be on the hook – and on a payroll – to be taxed to meet debt obligations in 20 or 30 years time, then they would surely demand more return upfront before buying.

Hence higher yields.

Cliff-edge notes

To be clear I’m just floating this as a thought experiment.

We have seen very strong corporations borrow at very low rates in the past, without an AI takeover story to justify the rates.

And today the hyperscalers are still paying a premium over US Treasuries.

But if that were to flip – if yields on the safest government bonds were to go meaningfully above the yields on AI-backed debt – then that could be a sign that at least one doomsday scenario may be coalescing into reality.

I know – it seems far-fetched.

But a lot of clever people have said a lot of wild and scary things in recent years about where AI could soon take us.

Is it then really such a stretch to believe that if some of those scenarios looked like coming true that we’d see it in the most important market in the world – the US bond market?

I’d suggest it’d actually be very rational!

Who knows? If you’re truly certain about where this is all going then I’d say you’ve not been paying enough attention.

Have a great weekend, and a few more links on that bond market tumult:

Rates rising mini-special

• The world appears to be entering a higher-rate era – CNBC
• How will bond market turmoil affect your finances? – Guardian
• The bond market blowout spells Budget pain – This Is Money
• Stocks are sexy, but bonds are more important – Axios
• Crisis talks – Behavioural Investment

From Monevator

Paying off the mortgage with your pension – Monevator

From the archive-ator: 10 things to do today to reset your life – Monevator

News

UK long-term borrowing costs highest since 1998 – BBC

House prices up 0.2% in ‘subdued’ August, says Nationwide – Standard

Three more firms join exodus from London Stock Exchange – City AM

Netherlands moves billions in gold to London in ‘crisis preparedness’ – BBC

760,000 matured Child Trust Funds still remain unclaimed – FCA

Revolut wins conditional US banking licence – Reuters

Nearly a million low-earners owed a pension top-up by HMRC… – Which

…but another million are now in the higher tax brackets – This Is Money

South Korea is boring its day traders out of recklessness – Yahoo Finance

IKEA cuts prices amid cost-of-living crisis – BBC

Figure 1: UK real household income outlook downgraded post-conflict

Iran War to cost each UK household £2,400 by next year – C.E.B.R.

Products and services

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Santander switch offer: £240 cash, 8% on regular savings – B.C.W.Y.C.

The cheapest mortgage lenders in the market – Which

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Coventry BS offers first-time buyers 6.5x salary mortgages – T.I.M.

Protect yourself from QR parking code scams – Be Clever With Your Cash

Want the very best of Monevator? Become a member to get our exclusive premium content – Find out more

Virgin Money 6.5% regular saver review – Be Clever With You Cash

Natwest’s £500 Premier current account switch bonus – This Is Money

Homes for sale minutes from a train station, in pictures – Guardian

Comment and opinion

Investing when your portfolio gets bigger – A Wealth of Common Sense

The more important forms of currency – The Root of All

Investment growth creates 65% of a typical pension pot – This Is Money

If you’re worried about bonds, you’re doing them wrong – Morningstar

How divorce can drive you into pension poverty – Which

Ten truths about spending down your nest egg – The Purpose Code

Ben Carlson: risk, reward, and the future [Podcast] – Flyover Stocks

What’s a safe retirement rate after you’ve already retired? – Morningstar

Victor Haghani: risk, ruin, reinvention, and resilience [Podcast] – T.I.P.

Naughty corner: Active antics

The scaling versus profitability trade-off – Aswath Damodaran

The crowd isn’t stupid, just reckless – The Falling Knife

Sarah’s wager [A few weeks old] – Colossus

Solvency is a necessity – RCM Alternatives

The best stock of the last 20 years fell 50% four times – Brian Feroldi

Kindle book bargains

Thinking, Fast and Slow by Daniel Kahneman – £0.99 on Kindle

The Barclay Dynasty by Jane Martinson – £0.99 on Kindle

Feel-good Productivity by Ali Abdaal – £0.99 on Kindle

Clear Thinking by Shane Parrish – £0.99 on Kindle

Or pick up one of the all-time great investing classics – Monevator shop

Environmental factors

The race to stop England running out of water – BBC

Meet the women leading Norway’s seaweed revolution – Vogue

Argos becomes first UK retailer to sell plug-in solar panels – Independent

Kākāpō rising: 90 chicks swell population of heaviest parrot – Guardian

Robot overlord roundup

The rise and fall of agent civilisations – Dwarkesh Patel

nVidia strikes $12.9bn deal to buy AI platform Hugging Face – BBC

We can’t let AI writing take over the Internet – Derek Thompson

London’s first self-driving taxis for hire hit the streets – Guardian

Not at the dinner table

Jim O’Neill: capital gains tax hike looms under Burnham – City AM

Brexit’s lessons for Canada in its trade rift with US – The Conversation

Iceland’s ties with EU mean no is not a Brexit-style rejection – Guardian

The rise of ‘Cancer Capital’ – Anil Dash

US medical groups urge flu and Covid shots, despite Trump – Guardian

Life choices and goals mini-special

The discipline required to live the life you want – Ryan Holiday

Alan Watts: everything in life is a game – Darius Foroux

The private equity boyfriend economy – Your Brain on Money

Why deny kids out of fear of making them lazy? – The Purpose Code

Off our beat

London’s housebuilding woes: the sums don’t work – Standard

The wretched refuse – Colossus

A review of 1991’s unsettling Aztecs: An Interpretation – Mr & Mrs P

Should we eradicate mosquitos? – Uncharted Territories

An Unexpected Life by Gloria Steinem review – Guardian

I refuse to miss my daily exercises, says 103-year-old – BBC

And finally…

“I didn’t save money until I was past 50. I was sure that I’d end up as a bag lady, like women I saw sleeping in subway stations. I used to handle that fear by thinking: It’s a life like any other. I’ll organise the other bag ladies.”
– Gloria Steinem, An Unexpected Life

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