Bank of America Strategist Urges Shift to Tech Bonds
Michael Hartnett recommends investing in mega-cap technology bonds over stocks due to attractive yields driven by massive AI infrastructure spending.
Bank of America chief investment strategist Michael Hartnett recommends that investors shift from mega-cap technology stocks to technology bonds, citing attractive yields between 6% and 8%. Hartnett argues that the immense debt required to fund artificial intelligence infrastructure has pushed yields higher, creating a window for credit investors to find "diamonds in-rough."
This recommendation follows a period of decline for tech stocks after earnings reports highlighted astronomical capital expenditures and negative free cash flows. Alphabet Inc. forecasts full-year capital expenditures between $195 billion and $205 billion, while Amazon.com maintains a forecast of $220 billion.
Companies are employing different financing strategies to sustain AI growth. Microsoft announced $25 billion in new bond issuance, while Meta Platforms Incorporated plans to raise $95 billion through stock offerings. Hartnett suggests the move by Meta signals a new respect for credit investors and the end of the era of large-scale stock buybacks.
