This article first appeared on GuruFocus.
Bank of America strategist Michael Hartnett says the massive AI borrowing boom may have created an overlooked opportunity in beaten-down technology bonds.
U.S. investment-grade tech bonds are down about 9% year to date, pushing their relative performance versus the broader investment-grade bond market to roughly 30-year lows.
The main reason is supply.
Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), Meta (NASDAQ:META), Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT) and Oracle (NYSE:ORCL) have issued around $182 billion of bonds in 2026, compared with just $17 billion in 2024.
That flood of new debt has pushed yields much higher.
Across investment-grade technology names, yields now sit in the 6% to 8% range for some long-dated issues. Oracles 2066 bonds yield about 8.43%, Metas 2066 paper around 7.40%, and Amazons 2076 notes roughly 6.81%.
Even stronger balance-sheet names such as Nvidia, Alphabet, Microsoft and Apple are offering yields above 6% on some long-dated bonds.
The picture is even more extreme in speculative-grade AI-linked debt.
CoreWeaves 2031 notes yield about 14.26%, while Galaxys 2031 debt yields 11.44% and SoftBanks 2034 issue roughly 9.58%.
Hartnett believes this selloff may be creating diamonds in the rough as investors increasingly demand more compensation for financing AI infrastructure.
The borrowing boom is also changing how Big Tech allocates capital.
Hyperscalers have paired their debt issuance with roughly $89 billion of equity issuance, bringing combined debt and equity issuance to $271 billion year to date.
At the same time, annualized share repurchases have collapsed to about $14 billion, down from roughly $105 billion in 2024.
Investor takeaway
I think the most important part of Hartnetts call is that the AI boom is beginning to look very different depending on whether you are a stockholder or a bondholder.
For years, mega-cap tech companies generated enormous cash and returned much of it through buybacks.
Now they are raising huge amounts of outside capital to fund data centers, chips and power infrastructure.
That has hurt bond prices, but it is also pushing yields to levels rarely associated with some of the strongest technology companies.
For investors, the key question is whether the extra yield adequately compensates for longer maturities, heavy future capex and potential deterioration in credit metrics.
The key things to watch are new bond issuance, hyperscaler capex, leverage, buyback activity and whether AI infrastructure spending continues to accelerate.
Tech bonds have been punished.
Hartnett thinks that punishment may finally be creating opportunity.
