Big Tech bonds, not stocks, offer more opportunity right now, says Bank of America
Tech bond yields have jumped because of concerns over mounting debt. Bank of America's Michael Hartnett sees an opportunity.
TL;DR
- Mega-cap tech bonds, not stocks, are currently seen as a significant opportunity.
- Concerns about debt for AI buildout have increased bond yields, with some investment-grade hyperscalers offering up to 8%.
- Hyper-scalers have issued substantial debt and equity this year.
- Tech stocks have recently declined following earnings reports that showed unexpectedly large negative free cash flows and astronomical capital expenditures.
- Microsoft is entering the bond market for AI financing, while Meta Platforms is raising funds through stock offerings.
- Increased stock sales by hyperscalers may signal the end of the era of big stock buybacks.