Bank of America’s cautious AI strategy weighs on credit trading

Bank of America’s credit traders are feeling the effects of the bank’s decision to sit out some of the largest artificial intelligence deals to reach the market.

Companies have issued more than $400 billion of debt this year to fund AI infrastructure, creating heavy trading volumes as fixed-income investors absorb the new supply. Bank of America has lagged rivals in corporate debt and has struggled to capture some of that activity, according to people familiar with the matter.

The slower positioning, along with weaker volumes in municipal bonds and other rates products, contributed to Chief Executive Officer Brian Moynihan’s forecast that third-quarter trading revenue will be relatively flat. The outlook sent the bank’s shares lower last week.

“We’re not as well positioned in some of the businesses that had more activity,” Moynihan said. He said sales and trading should have one of the bank’s better third quarters but remain relatively flat. A Bank of America spokesperson declined to comment.

The bank has shifted its stance toward AI startups after executives questioned their spending needs last year. It provided OpenAI with a $520 million credit line earlier this year and in August committed to invest $250 billion in US critical infrastructure through the middle of next year, including data centers and computing power.

Bank of America sold $14 billion of bonds tied to an Oracle data center in Michigan in April, with about $10 billion bought by Pacific Investment Management. But it was absent from other major deals, including a $3.9 billion high-grade bond issued by Blackstone-backed QTS Realty Trust.

Tech bonds and hyperscalers account for more than 20% of the investment-grade index maturing in at least 10 years, while Apollo Global Management estimates AI-related debt makes up nearly 40% of new supply. Bank of America remains the third-largest manager of US investment-grade and high-yield issuance, behind peers including JPMorgan and Morgan Stanley.

JPMorgan expects third-quarter trading revenue to rise by the mid-to-high teens, while Citigroup expects mid-single-digit growth. Bank of America’s trading business could still post its 17th consecutive period of growth, Moynihan said, but the bank has only a few weeks left in the quarter to deliver it.