AI Productivity Boom May Be Fueling Rise in Bond Yields, JPMorgan Strategist Says

The recent increase in long-term bond yields may be driven by more than just inflation fears and mounting government debt, according to a strategist at JPMorgan Private Bank. The market could be pricing in expectations of a significant productivity boom spurred by investment in artificial intelligence.

A New Take on Rising Yields

Jacob Manoukian, U.S. head of investment strategy at JPMorgan Private Bank, told the Reuters Global Markets Forum that the bond market might be detecting an improved productivity cycle stemming from the current wave of AI investment. This perspective offers an alternative explanation for rising yields, which are more commonly attributed to concerns about persistent inflation and the supply of U.S. government bonds.

An anticipated rise in long-term productivity and economic growth can lead investors to demand higher compensation for holding long-duration bonds, pushing yields upward.

Opportunity in Semiconductors

Reflecting this outlook, JPMorgan maintains a positive view on the semiconductor sector, a primary beneficiary of the AI build-out. Manoukian noted that despite a recent correction of more than 20%, the sector presents a potential opportunity for investors.

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The discount between two-year forward and trailing 12-month price-to-sales multiples for chipmakers has widened to 40%-50%, compared to a historical average of around 20%. According to Manoukian, this suggests investors have already priced in a peak in earnings. He believes earnings have not yet peaked, creating upside potential if companies meet existing sales forecasts.

AI-Driven Corporate Debt

The AI investment expansion is also fueling a surge in corporate borrowing as hyperscale tech companies increase spending on data centers and other infrastructure. Key figures highlight this trend:

• AI-related corporate debt issuance has surpassed $220 billion this year, doubling last year's total.
• Overall U.S. corporate bond issuance has reached $1.68 trillion so far this year, an increase of nearly 27% from the same period in 2025.

Some market observers suggest this growing supply of high-quality corporate debt could be reducing demand for U.S. government bonds, contributing another layer of upward pressure on Treasury yields.