BofA Survey Finds Most Fund Managers Now Worried About Overinvestment Amid AI Capex Surge; ‘Slow Down, Hyperscalers’

• A majority of 172 fund managers surveyed by Bank of America in early November believe that companies might be ‘overinvesting.’
• The results add to concerns about an ‘AI bubble’ – a view that tech valuations and investment are potentially outpacing long-term earnings prospects.
• 45% of respondents believe the AI bubble is the biggest risk, and 63% of survey participants now believe global equity markets are overvalued.

As markets face correction amid concerns of an “AI bubble,” a new survey shows that a sizable percentage of fund managers believe that companies might be “overinvesting” in artificial intelligence (AI).

A Bank of America poll of 172 fund managers, who collectively manage $475 billion in assets, found that a majority believe companies are spending too much on capital expenditures, according to a CNBC report. It was the first time this has been the majority view since BofA’s 2005 survey.

“This jump is driven by concerns over the magnitude & financing of the AI capex boom,” BofA’s strategists said in their note titled ‘Slow down, hyperscalers.’

The survey results add to growing concerns about a potential “AI bubble,” a view that today’s soaring tech valuations and the volume of investment pouring into new technologies such as AI may be running ahead of the actual long-term earnings potential. 

In recent months, certain top executives and analysts have flagged that while AI infrastructure spending has accelerated at an unprecedented pace, monetization paths for many emerging AI products remain uncertain, prompting questions about whether current market enthusiasm is sustainable.

Those concerns have led to a wide sell-off in the benchmark S&P 500 index, which declined for the fourth straight day on Tuesday, led by declines in AI-linked stocks such as Nvidia, Palantir, and Microsoft. Futures trading on Wednesday pointed to another cautious start. 

Nvidia’s quarterly earnings, due after the markets close on Wednesday, are expected to offer a key read on the industry’s underlying momentum and is likely to have a bearing on investor sentiment. 

Other Findings

According to the BofA survey, 45% of global fund managers said the AI bubble is the biggest risk, up from 1 in 3 the previous month. Of those surveyed, 53% said AI stocks are already in a bubble.

Meanwhile, BofA said a record 63% of survey participants now believe global equity markets are currently overvalued. 

Asked what companies should do with cash flow, one in three fund managers said firms should shore up their balance sheets. Thirty-one percent said those companies should return cash to shareholders, and 29% said firms should increase capital spending.

In the year-to-date, the SPDR S&P 500 ETF Trust (SPY) has advanced 12%, while the Invesco QQQ Trust Series 1 (QQQ), which tracks U.S. tech shares, has gained 16%.

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