AI giants spark an unprecedented wave of financing! Tech bonds down 9% this year; BofA strategist: the time to buy the dip may have arrived.

Bank of America Corp strategist Michael Hartnett believes that as tech giants aggressively take on debt to build out artificial intelligence (AI) infrastructure, U.S. tech corporate bonds have faced sustained selling, pushing yields up to attractive levels, and investors may already have a buy-the-dip opportunity. At the same time, this unprecedented AI financing boom is changing how tech giants allocate capital, and the era of relying on abundant cash flow for large-scale share buybacks may be coming to an end. Hartnett noted that U.S. investment-grade tech corporate bonds have fallen 9% year-to-date, with their performance relative to the broader investment-grade bond index dropping to the lowest level in 30 years. The main driver of the sustained pressure on tech bonds is the concentrated influx of large tech companies into the bond market to build AI infrastructure, causing a sharp increase in bond supply. Data shows that tech giants including Alphabet (GOOGL.US), Meta (META.US), Amazon.com, Inc. (AMZN.US), Microsoft Corporation (MSFT.US) and Oracle Corporation (ORCL.US) have issued a cumulative US$182 billion in bonds since the start of 2026, far above US$17 billion in 2024 a more than 10-fold increase in just two years. Such a massive increase in new bond supply has placed significant pressure on tech corporate bond prices and pushed yields steadily higher. Tech bond yields surge; high-quality corporate bond returns rise to 6% to 8% As AI-related bonds have sold off, yields on bonds issued by large tech companies, including the "Magnificent Seven," have risen to elevated levels. Hartnett noted that yields on some highly rated tech corporate bonds now stand at 6% to 8%, while yields on lower-rated AI-related corporate bonds have reached double digits. In the high-yield bond market, AI cloud computing company CoreWeave (CRWV.US) bonds maturing in 2031 yield as much as 14.26%, Galaxy Digital (GLXY.US) bonds maturing in 2031 yield 11.44%, and SoftBank Group bonds maturing in 2034 yield 9.58%. In investment-grade bonds, Oracle Corporation bonds maturing in 2066 yield 8.43%, and Meta bonds maturing in the same year yield 7.40%. In addition, Amazon.com, Inc. bonds maturing in 2076 yield 6.81%, Broadcom Inc. (AVGO.US) bonds maturing in 2056 yield 6.75%, NVIDIA Corporation (NVDA.US) bonds maturing in 2056 yield 6.67%, and Alphabet bonds maturing in 2075 yield 6.66%. Long-term bond yields of other tech giants are also generally at elevated levels. Among them, Micron Technology, Inc. (MU.US) bonds maturing in 2051 yield 6.27%, AMD (AMD.US) bonds maturing in 2052 yield 6.15%, Microsoft Corporation bonds maturing in 2062 yield 6.08%, and Apple Inc. (AAPL.US) bonds maturing in 2062 yield 6.06%. In Hartnett's view, the sharp decline in tech bonds has already made yields on some highly rated corporate bonds attractive, offering investors a potential allocation opportunity. However, rising bond yields also mean higher financing costs for the companies involved, and ultra-long bonds still face significant interest rate volatility risk. AI investment changes tech giants' financing model; equity and debt financing totals US$271 billion year-to-date In addition to the surge in bond issuance, tech giants are also raising funds through equity financing to support expanding AI capital expenditures. BofA data shows that since the start of the year, large tech companies have issued US$182 billion in bonds while also completing US$89 billion in equity financing, bringing total debt and equity financing to US$271 billion. This shift marks a major change in how the tech industry manages its balance sheets. In the past, large tech companies typically relied on strong operating cash flow to support business expansion and used large amounts of surplus cash for share buybacks. But as the capital needed for AI data centers, chips and other infrastructure continues to rise, tech giants are increasingly relying on external financing. Hartnett specifically noted that Meta's recent equity financing arrangement shows that tech companies are beginning to place greater emphasis on the interests of bond investors and the sustainability of their capital structure. He believes this change may mean that the long-term underperformance of AI-related bonds versus tech stocks is nearing an end. Tech giants' share buybacks plunge; the era of large-scale shareholder returns may be over Notably, the AI investment boom is not only driving rapid growth in tech companies' debt but also squeezing the cash they use to reward shareholders. BofA data shows that share buybacks by large cloud computing and AI infrastructure companies have fallen to US$14 billion on an annualized basis so far this year, far below US$105 billion in 2024 a decline of nearly 87%. This means tech giants are shifting more funds from share buybacks to AI infrastructure construction. For many years, sustained large-scale share buybacks have been one of the key factors supporting U.S. large-cap tech valuations and earnings-per-share growth. But against the backdrop of surging AI capital expenditures, companies clearly have less cash available for buybacks, potentially weakening this long-standing factor supporting tech stock performance. At the same time, as demand for bond financing increases, tech companies need to seek a new balance among expanding AI investment, maintaining credit ratings, controlling financing costs and rewarding shareholders.