The prospect of rising interest rates rippled across financial markets, as the potential spillover for technology companies and the broader economy came into focus. Equity markets exhibited another bout of volatility this week, notably in tech stocks. Potential rate hikes could push up borrowing costs for the companies spending heavily on the AI buildout. Hyperscalers’ capital expenditures are forecast to exceed $700 billion in 2026, according to figures compiled by Reuters and Futurum Research in May.

Projections released last week by the Federal Reserve suggested that officials inside the central bank have generally moved in a hawkish direction since the onset of the Middle East conflict. The U.S. personal consumption expenditures (PCE) price index was up 4.1% year-over-year in May, while first-quarter GDP growth was revised higher to 2.1% from 1.6% on an annualized basis, according to Commerce Department data published on Thursday. Oil prices have traded lower of late — near levels last seen during the early days of the war — potentially easing central bankers’ inflation concerns over the longer run. Reports indicated that tanker traffic through the Strait of Hormuz has increased since the U.S. and Iran agreed to a memorandum of understanding, which opened a 60-day window for talks over a peace deal. In other political developments, U.K. Prime Minister Keir Starmer announced in a speech on Monday that he will resign, paving the way for new leadership as early as this summer.

Soaring capital expenditures are just one factor driving market sentiment around the tech sector. Jennison’s Mark Baribeau, Head of Global Equity, challenges common misconceptions and shares his views on today’s AI investment landscape, from demand and valuations to emerging opportunities and key risks across the AI value chain.