STOCKS | Fidelity's Durance Avoids AI-Fueled Tech Debt

James Durance of Fidelity International is avoiding AI bonds. According to Sina Finance, the London-based portfolio manager, who oversees $14 billion, has kept his technology exposure in his income strategy below 2% while hyperscale cloud providers issue debt to fund the artificial intelligence boom. He said lending to the sector could swell to a size that poses risk by itself by the end of next year. Speaking in Singapore, Durance said he is not enthusiastic about the technology sector's rapid growth in the bond market and does not like it at current price levels. Amazon and Alphabet Inc. are among the companies borrowing heavily to invest in AI, competing with U.S. Treasuries for funding and pushing up long-term yields. According to Sina Finance, despite uncertain returns and safety concerns that have prompted some large-company executives to call for a slower pace of AI development, the wave of issuance has shown little sign of easing. Durance is the lead manager of Fidelity's Global Income, Global Short Duration Income and Global High Income strategies, and co-manager of the European High Yield strategy. His global income and short-duration funds are not constrained by benchmark indexes. He said benchmark fund managers may face increasing underweights if they do not buy, while his team does not need to. His short-duration fund returned 6.7% over the three years through August. The caution appears to have been justified. Over the past year, a Bloomberg technology corporate bond index has fallen more than 2%, while the broader global aggregate bond index has declined 1.3%.