BofA's Hartnett calls beaten-down tech bonds 'diamonds in the rough'

What happened

Bank of America strategist Michael Hartnett says beaten-down technology bonds may be worth buying. U.S. investment-grade tech bonds have fallen 9% this year, and relative returns versus the broader investment-grade bond index are at 30-year lows. Top AI hyperscalers issued $182B in bonds in 2026, up from $17B in 2024.

Confirmed

Global impact / market context

Heavy borrowing by AI hyperscalers has pushed bond prices down and yields up, which means investors can earn more interest from these companies' debt. Higher yields raise borrowing costs for the companies, while investors who buy now lock in larger interest payments if the issuers keep paying.

Analyst inference

Tech bonds have underperformed the wider investment-grade market by a wide gap, which suggests investors are demanding extra compensation to lend to AI-related issuers. If that extra compensation shrinks as concerns ease, bond prices could recover, rewarding buyers who accept the current risk.

Analyst inference

What to watch

1. Watch whether the technology bond selloff continues or reverses, since U.S. investment-grade tech bonds are down 9% this year and relative returns versus the broader investment-grade index sit at 30-year lows. Confirmed
2. Hartnett's view that beaten-down technology debt is a buying opportunity implies he expects yields to fall or defaults to stay low, so track whether credit spreads narrow as evidence for or against that call. Proposed
3. Watch whether hyperscalers keep issuing large amounts of new bonds, because more supply of debt can keep yields high and pressure prices, while a slowdown in issuance could support a recovery. Analyst inference

Evidence

• seekingalpha.com