A sustained break above 5% in the 10-year Treasury yield could weigh on stocks, particularly artificial intelligence companies, Breakout Capital founder and chief investment officer Ruchir Sharma said on CNBC Thursday. He described the 10-year Treasury as the most important asset in the world because it influences equity valuations and sets a baseline for mortgage, auto-loan and other borrowing costs. Sharma said historical data shows the relationship between stocks and bonds becomes positive once the yield exceeds 5%, and that equity prices decline for yields above 5.25%. The benchmark yield touched 5% earlier this week and reached a 19-year high before falling 5 basis points to 4.94% on Thursday. Higher yields raise the discount rate applied to future profits, reducing their present value. Energy prices, including Brent crude above $100 last week and record diesel prices, have added to inflation concerns amid the Middle East war. Inflation has remained above the Federal Reserve’s 2% target for five years. The Fed raised its federal funds rate by 25 basis points to 3.75% to 4% on Wednesday, while policymakers indicated another increase could come later this year. Fed Chairman Kevin Warsh said inflation remains too high, and the Fed sees inflation staying above its 2% target until 2029. Sharma said major market booms or bubbles have historically ended when interest rates rise and monetary tightening takes hold. He also warned that yields above 5% would worsen the fiscal burden of servicing more than $40 trillion in government debt. Mega-cap AI companies are turning to bond markets as infrastructure spending reduces free cash flow. Goldman Sachs said higher capital costs and greater capital intensity have reduced the value of future technology-sector cash flows, leaving forward price-to-earnings valuations close to the market average. Sharma noted that corporate balance sheets are stronger today than in the 1990s.