State Street's Ninghui Liu: Rising Rates, Japan Bond Yields, and China's AI Signal Macro Reset

The Quick Take

• State Street Global Advisors' Ninghui Liu warns the AI investment boom may be hitting a funding wall as rates rise
• Japan's rising bond yields are a key macro signal that the last pillar of global ultra-low rates is cracking
• China's open-source AI development is reshaping competitive assumptions about Western AI lab dominance

State Street Global Advisors executive Ninghui Liu, speaking to the Business Times Singapore, flagged three converging macro and AI market shifts that investors should be tracking. The first is whether the AI investment supercycle is encountering a funding constraint as interest rates stay elevated — a risk that high-multiple AI names and pre-revenue AI infrastructure plays are particularly exposed to. Liu's framing aligns with broader market scepticism about whether AI capex can maintain its 2024-2025 trajectory in a higher-for-longer rate environment.

Japan's rising bond yields represent the second signal — the normalisation of JGB yields as the BOJ tightens removes the last major source of global carry trade capital and reprices risk assets globally. For Singapore-based investors, who often intermediate between yen-funded capital and Asian-market deployment, the shift is consequential. Liu's third theme — China's open-source AI development — challenges the assumption that AI commercial dominance is structurally locked in for Western closed-model labs, with DeepSeek and other open-source Chinese models gaining international traction.

The key investment implication from Liu's framework is a rotation risk: if AI capex slows, mega-cap US tech valuations and cloud provider earnings growth estimates could face downward revision. Simultaneously, rising Japan yields and yen carry trade unwinding could trigger broad-based risk-off. China open-source AI adoption — if it gains enterprise traction outside China — would compress AI pricing power for Western API providers. All three signals converge to argue for a more cautious positioning in high-duration growth assets.

Synthesized from 1 source.