AI giants' cash crunch links their fortunes to rising bond yields
Bank of America strategist Michael Hartnett warns that the AI-driven Magnificent 7 are now vulnerable because their massive AI spending forces reliance on the bond market.
In a recent Master Investor podcast, Michael Hartnett of Bank of America warned that the "Magnificent 7" tech firms—Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla—have become exposed to the bond market after shifting from cash hoarding to massive AI investment. He said their AI capex, projected to top $1 trillion by 2026, has pushed them into negative cash flow of roughly $200 billion, making them dependent on borrowing as bond yields rise.
With 10-year Treasury yields at a near-20-year peak and 30-year yields above 5.5% for the first time since 2002, higher financing costs could limit AI spending and dampen the equity-driven wealth effect. Hartnett linked this risk to Treasury Secretary Scott Bessent’s recent bond-buyback scheme, noting policymakers will act to avoid market disorder, especially as the U.S. seeks to stay ahead of China in AI. He added that while Wall Street watches bond levels, the ultimate threat may come from voters opposing AI.
Why it matters
The story shows how rising bond yields could curb AI spending by the biggest tech firms, affecting markets and the U.S. AI leadership race.
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