AI Boom Could Be Driving Bond Yields Higher, JPMorgan Private Bank Says
Synopsis
Investors may be pricing in stronger economic productivity from the AI investment boom, helping push long-term bond yields higher, according to JPMorgan Private Bank, which also remains bullish on semiconductor stocks despite their recent correction.
Rising long-term bond yields may signal more than inflation fears and mounting government debt.
Jacob Manoukian, JPMorgan Private Bank’s US head of investment strategy, says investors may be pricing in an AI-driven productivity boom as companies pour money into data centres, semiconductors and other infrastructure.
Speaking to the Reuters Global Markets Forum on Thursday, Manoukian said the bond market could be “sniffing out” a stronger productivity cycle from the wave of AI investment.
That interpretation has received less attention as investors focus on rising borrowing needs and elevated Treasury yields.
AI Spending Reshapes Bond Markets
The AI boom is already driving a major increase in corporate borrowing. AI-related debt issuance has topped $220 billion this year which is twice of last year’s total. Overall US corporate bond issuance has reached $1.68 trillion, nearly 27% higher than the same period in 2025.
Manoukian warned that the surge in borrowing by hyperscalers and other AI companies could increase competition for capital at the longer end of the bond market. AI-related issuance could reach half the level of US Treasury coupon issuance by year-end, he said.
That growing supply comes as investors debate whether corporate debt could crowd out demand for government bonds, contributing to pressure on long-term yields.
JPMorgan Sees Semiconductor Opportunity
JPMorgan Private Bank remains bullish on semiconductors despite a correction of more than 20%.
Manoukian said the discount between two-year-forward and trailing-12-month price-to-sales multiples has widened to 40%-50%, compared with a typical 20%. He believes the market may already be pricing in a peak in semiconductor earnings even though earnings have not necessarily reached their high point.
If companies deliver sales already expected by analysts, their valuations could rise materially if investors continue assigning similar multiples.
The bank’s preference within fixed income is meanwhile shifting towards shorter-duration credit rather than outright exposure to long-term bonds. Manoukian believes rates markets have become too hawkish while credit spreads offer attractive carry that could cushion returns if rates remain elevated.
In the US, JPMorgan favors bank preferred securities, partly because of their potential tax advantages. In Europe, it prefers high-yield credit, citing relatively strong corporate fundamentals despite higher yields, government debt and energy-supply concerns.
Source: Reuters
Vishal is an experienced Editor at Inspirepreneur Magazine with key interests in artificial intelligence, eCommerce, entrepreneurship, lifestyle and startup sector. Prior to joining Inspirepreneur, he was a Content Writer cum Correspondent at Siliconindia Magazine, where he worked on Company Profiles, Cover Stories, Executive Profiles, Feature Articles and Thought Leadership content.
