Rising U.S. long-term bond yields may reflect investor optimism about artificial intelligence-driven productivity gains rather than inflation or fiscal concerns, according to Jacob Manoukian, U.S. head of investment strategy at JPMorgan Private Bank.
Speaking at the Reuters Global Markets Forum on Thursday, Manoukian noted that increased AI-related capital expenditures are driving higher corporate borrowing, which has contributed to elevated bond yields. AI-related debt issuance has already surpassed $220 billion this year, nearly double the total from 2025, while overall U.S. corporate bond issuance reached $1.68 trillion, up 27% from the same period last year.
The strategist highlighted that the bond market appears to be pricing in an improved productivity cycle stemming from current AI investments. This outlook contrasts with the semiconductor sector, which has experienced a correction of more than 20% despite being a primary beneficiary of AI spending. The discount between two-year forward and trailing 12-month price-to-sales multiples for semiconductors has widened to 40%-50%, compared with a typical 20% gap, suggesting the market is pricing in weaker near-term earnings.
JPMorgan maintains a constructive view on semiconductors, arguing that current valuations overlook potential upside. Manoukian stated that if companies meet analysts' sales forecasts, valuations could rise materially by 2028, even if trailing earnings remain unchanged. Some investors have warned that the surge in corporate debt supply could reduce demand for U.S. government bonds, further pressuring Treasury yields.
