Rising long-term bond yields may reflect expectations of an AI-driven productivity boom, not only inflation concerns and growing government debt, Jacob Manoukian, JPMorgan Private Bank’s U.S. head of investment strategy, told the Reuters Global Markets Forum. He said the outlook also supports semiconductors, a major beneficiary of AI investment, despite a correction of more than 20%. The gap between two-year forward and trailing 12-month price-to-sales multiples has widened to 40%-50%, compared with a typical 20%, indicating that weaker earnings are already partly priced in. Manoukian said semiconductor companies could appreciate materially if they achieve analysts’ sales forecasts and investors continue to value them at the same trailing 12-month earnings multiple in 2028. AI investment is also driving a borrowing surge among hyperscalers (large-scale cloud companies), increasing competition for long-term funding as they build data centers and other infrastructure. AI-related debt issuance has exceeded $220 billion this year, twice last year’s amount, while U.S. corporate bond issuance has reached $1.68 trillion, nearly 27% above the comparable period in 2025. With Treasury yields surging, some investors argue that corporate debt supply could increasingly reduce demand for U.S. government bonds. Manoukian said AI-related issuance could equal half of U.S. Treasury coupon issuance by year-end. Against elevated long-term yields and uncertainty over the eventual level of the long end of the curve, JPMorgan Private Bank prefers carry from shorter-duration credit to outright duration exposure. Manoukian said rates markets have become too hawkish while credit spreads offer carry that can cushion returns if rate hikes continue. He favors bank preferreds in the U.S. and high-yield credit in Europe, citing tax treatment, capital-structure seniority and relatively strong corporate fundamentals.