Investors are showing fatigue after a wave of AI-driven bond sales, and that supply has left tech trailing the wider investment-grade market in recent months. You can see it in wider spreads, the extra yield over Treasuries buyers now want, and in the steady climb of credit default swap costs for big-name tech companies pushing the AI buildout.
A Bloomberg chart in the piece underscores the point that investors are asking for higher yield premiums on tech bonds. The data also note that the average spread across the broader high grade index sits at 80 basis points, while investment-grade tech spreads are nearly 10 basis points wider than that.
Cohen has been cautioning about an AI bubble coming to credit markets, and he still is not calling a turn for tech debt. What he is doing is looking for value in select top-tier names. "I don't know that I need to call the bottom," he said. "Alphabet and Amazon are very good credits and if their spreads are significantly wider than what I consider reasonable, then they become a buy."
He added that the sector and AI-linked bonds have lagged, so being light on them has made sense. "But I think at some point the high-quality hyperscalers, particularly Alphabet and Amazon that have seen their spreads widen, are becoming quite interesting." He put it plainly: "They represent index spreads, but with better-than-index risk. They're AA, they're high quality." S&P Global Ratings has Alphabet at AA+ and Amazon at AA.
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Cohen likes setups where company fundamentals look solid, yet a wave of issuance is pressuring prices. "I generally like a setup where a credit is fundamentally sound, but there's a technical supply issue that's overwhelming the market," he said.
He also cautioned that spreads can keep moving out as the market lines up for what could be a record September for high-grade sales, and as tech's investment race in AI continues. He said it is tough to know when supply stops weighing on valuations. One side effect, in his view, is that as highly rated tech becomes more compelling, weaker borrowers might have to offer fatter yields to compete.
He said the same dynamic could hit data center bonds, where the extra yield over debt issued by hyperscalers may need to widen to keep investors interested. "I think these large issuers could potentially be crowding out a lot of other credits," he said.
Tech bond math is shifting. You have some of the strongest credits in the market trading near index-level spreads, even though their ratings are higher than the index average. If the supply bulge keeps pressuring prices, it could keep resetting where income and perceived safety meet in corporate bonds. That is the through-line Cohen is watching as he sifts for value among the highest quality names.
