Warsh Puts Inflation First, Lifting Yields as Chip and AI Shares Retreat

United States government bond yields rose after Kevin Warsh, the chair of the Federal Reserve, emphasized that his overriding goal is restraining inflation, according to a markets summary from Israeli outlet Globes. The outlet reported that the message pushed Treasury yields up and coincided with a decline in semiconductor shares on Wall Street, which in turn lowered the dual-listed Israeli chip stocks Camtek, Nova and Tower and left the Tel Aviv benchmark modestly lower.

The decline in technology stocks arrived alongside a warning from investor Michael Burry, who Globes reported has taken new short positions against the artificial-intelligence trade, with Tesla, Caterpillar and an exchange-traded fund of chip stocks among his targets. Burry described the position as marking what he called the beginning of the end of the current cycle.

Viewed from a sound-money perspective, the two developments describe the same tension. Years of cheap credit financed heavy investment in artificial intelligence and the hardware behind it, and a central bank that now prioritizes fighting inflation over easy policy raises the cost of holding those positions. When the discount rate rises, the most highly valued assets, those whose returns lie furthest in the future, are repriced first.

A Federal Reserve focused on inflation also tends to strengthen the dollar, which pressures export-heavy stock markets and the hard assets that compete with interest-bearing cash. The semiconductor selloff spreading from New York to Tel Aviv is an early example of how quickly a change in the central bank's approach spreads across borders.