This strategist correctly recommended shorting Big Tech debt last year. Now he says the yields make it attractive.

What happened

Big tech companies have borrowed heavily to fund artificial intelligence ambitions. Bonds from investment-grade technology companies have underperformed the broader asset class by 9% this year, the worst in three decades. Bank of America strategist Michael Hartnett now says yields as high as 8% make this debt attractive, reversing his earlier recommendation to short it.

Confirmed

Global impact / market context

Higher yields mean investors earn more interest for lending to these companies. That makes tech bonds more competitive against stocks because investors can get paid while waiting. It also raises borrowing costs for companies funding artificial intelligence, which could slow spending plans and pressure profits.

Analyst inference

Hyperscaler debt issuance has surged to $182 billion this year from $17 billion in 2024 as companies fund artificial intelligence. The extra supply pushed down bond prices and pushed up yields. Hartnett's shift suggests credit investors now have more bargaining power relative to equity holders after years of cheap borrowing.

Analyst inference

What to watch

1. Watch whether tech bond yields stay near 6% to 8%, since those levels are what Hartnett calls attractive for investors buying this debt rather than stocks. Confirmed
2. Watch whether companies slow artificial intelligence capital spending, which means money spent on long-term projects, if borrowing costs remain elevated and debt keeps piling up. Proposed
3. Watch the gap between tech bond returns and the broader bond market, because further underperformance could test Hartnett's reversal and signal lasting stress for these borrowers. Analyst inference

Evidence

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