On August 19, Asian markets were hit by a "Black Wednesday" session, with South Korea's KOSPI plunging more than 5%, while China's ChiNext and the STAR 50 both sank over 6%. Beyond the narratives of tech rebounds meeting resistance and crowded trades, a key offshore variable was stirring up a global storm.
The previous evening, the US 30-year Treasury yield surged to 5.337%, the highest level since 2007, while the 10-year yield touched 4.7478%, a peak not seen since January 2025. Tech assets were subsequently sold off heavily, with the Philadelphia Semiconductor Index tumbling 4.98%.
Following this, the US Treasury stepped in to soothe the market the next day, raising the size of its long-dated bond buyback operations from $2 billion per operation to at least $4 billion. Markets reacted swiftly, and all three major US stock indices closed higher, snapping a three-day losing streak. This morning, the KOSPI extended its intraday gains to 4%, and A-shares also opened broadly higher. For now, the fate of global tech stocks appears tied to every uptick and downtick in US Treasury yields.
Behind this lies a pricing chain that has linked US Treasury yields and global tech stocks for decades. With long-term risk-free rates above 5%, can the tech rally continue? What does this mean for everyday investors, and why are growth-oriented tech names feeling the tremors most acutely?
Understanding the Core Connection
To grasp the relationship, one must start with a fundamental valuation model—the discounted cash flow (DCF) approach. A company's current worth equals the sum of all its future free cash flows, discounted back to the present at a certain rate. In this model, the 10-year Treasury yield serves as the risk-free rate in the denominator.
A simple illustration: suppose a company generates $100 in cash five years from now. If the required return is only 3%, that $100 is still relatively valuable today. But if the return requirement rises to 5% or even 6%, the present value of that same $100 shrinks considerably. This is the core impact of rising Treasury yields on tech stocks—it lifts the discount rate and diminishes the current value of "future money."
Meanwhile, rising yields also transmit to tech equities through two other channels. First, financing costs climb, as AI infrastructure expansion relies heavily on debt financing, and higher rates mean larger interest expenses. Second, capital flows shift—when risk-free rates stand above 5%, Treasuries themselves become highly attractive, drawing funds away from emerging markets and riskier assets. These three pathways combined make tech stocks—especially high-valuation growth sectors like AI computing and semiconductors—the most sensitive asset class to long-end rate movements.
Will Surging Yields Burst the AI Bubble?
History offers several examples of tech frenzies being "strangled" by rising rates. In 2022, the Federal Reserve's aggressive hiking cycle drove yields up at a historically rare pace, with a cumulative rise exceeding 250 basis points over the year. That year, the Nasdaq 100 and global tech sectors experienced their steepest annual declines since the 2008 financial crisis.
Objectively, rising US bond yields do put pressure on equity valuations most of the time, but the impact is largely felt on the denominator side. Exceptions arise when industrial change is powerful enough to make the numerator unstoppable. Whether in the 1990s dot-com boom or the 2021 new energy rally, rising yield cycles did not end those industrial trends. The key was that earnings growth and industry momentum offset the drag from higher risk-free rates, allowing stocks to rally against the headwind of a climbing discount rate.
According to a decomposition of gains in major global tech markets and key A-share tech growth sectors this year, as cited by Industrial Securities, valuations are no longer the main driver—in many cases, they have even been a drag. Instead, earnings are the primary contributor to the advance in tech growth assets this year. Therefore, while short-term denominator volatility may cause fluctuations, the more critical factor remains the verification of numerator-side prosperity and industrial trends.
Implications for Today's Investors
After the emotional turmoil subsides, the focus must return to assessing the health of the AI industry's momentum and trajectory. As a key representative of domestic new quality productive forces, the AI-driven tech sector has remained a policy priority this year. The late-July Politburo meeting further signaled clear support for developing the tech industry, accelerating the shift from old to new growth drivers, and promoting high-quality development. The medium-to-long-term prosperity trend remains unchanged.
While staying committed to the tech growth theme, sharpening the focus on profitability screening becomes especially important amid the current liquidity upheaval. China Merchants Securities research points out that under the twin pressures of rapid AI development and overseas technology restrictions, the semiconductor chip industry is simultaneously benefiting from AI capital expenditure expansion and continued domestic policy support. The industry chain is beginning to show clear signs of earnings delivery at the company level, with market trading logic shifting from "future potential" to "realized profits."
The research suggests that memory chips, domestic computing chips, and equipment, materials, and components represent the three major earnings pathways. Industry chain prosperity continues to rise, and revenue and profits are gradually entering a phase of realization.
At the same time, uncertainties such as overseas monetary policy and geopolitical tensions warrant vigilance. Investors should maintain defensive positions at the baseline while seizing opportunities with a balanced approach. High-dividend sectors like banks, with their low valuations and bond-like attributes, alongside stabilizing earnings and net interest margins, have frequently outperformed during tech downturns and may serve as a prudent choice for balanced allocation.
Related ETFs: The HuaBao STAR Chip ETF (589190) passively tracks the STAR Chip Index, covering core segments of the chip supply chain, with memory and semiconductor materials/equipment content at 49.95% and 30.57% respectively (as of 2026.8.19), effectively mapping the industrial trend driven by ongoing upgrades in AI computing infrastructure. The HuaBao Bank ETF (512800) passively tracks the CSI Bank Index, which currently has a price-to-book ratio of only 0.68 times and a dividend yield of 4.27% (as of 2026.8.19), offering attractive medium-to-long-term allocation value.
Data sources: Shanghai and Shenzhen stock exchanges, public information compilations. Institutional views: Industrial Securities, August 19, 2026, "How to View the Impact of Surging US Bond Yields on Markets and Tech Stocks"; China Merchants Securities, June 2, 2026, "AI Wave Combined with Domestic Substitution, Chip Industry Ushers in the First Year of Earnings Delivery."
ETF fee note: When investors subscribe to or redeem fund shares, the subscription/redemption agent may charge a commission of no more than 0.5%, including fees charged by stock exchanges and registration agencies. Fund fee rates are detailed in the fund's legal documents.
Risk disclosure: The HuaBao STAR Chip ETF (589190) and its feeder fund passively track the STAR Chip Index, with a base date of December 31, 2019, and a publication date of June 13, 2022. The index's returns over the past five full years are: 2021, 6.87%; 2022, -33.69%; 2023, 7.26%; 2024, 34.52%; and 2025, 61.33%. Volatility over the same period: 2021, 34.32%; 2022, 36.60%; 2023, 28.64%; 2024, 44.67%; and 2025, 34.34%. The HuaBao Bank ETF (512800) and its feeder fund passively track the CSI Bank Index, with a base date of December 31, 2004, and a publication date of July 15, 2013. The index's returns over the past five full years are: 2025, 6.79%; 2024, 34.71%; 2023, -7.27%; 2022, -8.78%; and 2021, -4.41%. Volatility over the same period: 2025, 14.03%; 2024, 19.34%; 2023, 13.41%; 2022, 18.56%; and 2021, 18.63%. Index constituent stocks are adjusted according to index compilation rules, and past performance does not indicate future results. The index constituents mentioned are for illustrative purposes only; descriptions of individual stocks do not constitute investment advice of any kind, nor do they represent the holdings or trading activities of any fund managed by the fund manager. The fund manager rates the HuaBao STAR Chip ETF (589190) as R4 (medium-high risk), suitable for investors with an appropriateness rating of C4 or above. The HuaBao Bank ETF (512800) is rated R3 (medium risk), suitable for investors classified as balanced (C3) or above. Any information in this article (including but not limited to individual stocks, comments, forecasts, charts, indicators, theories, or any form of expression) is for reference only. Investors are solely responsible for their own investment decisions. Furthermore, any views, analyses, or forecasts in this article do not constitute investment advice to readers of any kind, nor are they responsible for any direct or indirect losses arising from the use of the content herein. Fund investment carries risks. Past performance of a fund does not represent its future performance. The performance of other funds managed by the fund manager does not constitute a guarantee of fund performance. Investors should invest cautiously.
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