Convertible bonds are a way to play bet on AI with less risk, according to one strategist. Schroders’head of multi-asset incomeDorian Carrellsaid convertible bonds were an asset class “people don’t talk about enough” and were up around 15% so far this year. “We think that’s an asymmetric AI story.Very highrisk-return,very highcomponents of supply chain and AI, but you get a lot ofupsidewith not much downside,” he told CNBC’s “Squawk Box Europe” on Monday. Convertible bonds are corporate bonds that can be converted into company shares, meaning they have the features of a regular bond but with an equitycomponent. It has been a rollercoaster few weeks in global equities, as the push and pull betweeneconomic data,earningsand AI-fueled bubble fearsplayedout in the markets.There has been an uptick in tech firms issuing debt, which added further pressure on the market–whetherit’s healthy or not has splitexperts. While Carrell didn’t name specific stocks, big tech firms Alphabet , Meta and Amazon are among those that have raised debt to ramp up AI efforts. Oracle, too, has been increasingly reliant on debt to fund its AI infrastructure build; analysts have flagged its tight free cash flow as investors keep an eye on how such companies are net cash positioned. Carrell said that”Europe looks like a beacon of stability” given its2% ratesand2% inflation”give or take,”whilefor AI”the picks and shovels are much cheaper in Asia, including a little bit in Japan as well.” He added:”Sowe thinkyou’vegot to look elsewhere.You’vegot to broaden out by asset class, broaden out by region as well.”
