Is AI momentum starting to cool? BofA weighs in
Yahoo Finance ·
Is AI momentum starting to cool? BofA weighs in Sam Boughedda Fri, June 26, 2026 at 7:05 AM EDT 1 min read BAC Investing.com -- Bank of America warned that the artificial intelligence-driven momentum rally may be losing steam, flagging growing risks around monetization and commodification that could pressure corporate earnings and equity markets globally. In a European equity strategy note, BofA said the AI capital expenditure boom has created "a macro and market environment unlike anything investors have seen over the past two decades," lifting margin expectations to all-time highs and compressing risk premia to multi-decade lows. However, the bank feels that the environment is now under threat. BofA pointed to signs that end users are pushing back on AI pricing, with corporates "beginning to ration usage and/or shift to cheaper open-source alternatives." Lower-cost models are "establishing a global price anchor," while new tools are reducing vendor lock-in and increasing price transparency, pointing to "a more commoditised and competitive landscape than implied by record margin expectations." The bank noted that U.S. hyperscalers have underperformed the S&P 500 by almost 15% since January, describing this as a sign of "growing investor unease about expected returns." BofA remains negative on European equities despite reduced macro risks following the U.S.-Iran peace deal and a rebound in U.S. jobs growth. The bank stayed underweight cyclicals versus defensives, describing AI enablers including semiconductors, capital goods and mining as "most stretched." It warned that banks, as the biggest sector in the high-momentum basket, face elevated risk of underperformance in any momentum reversal, while staples were flagged as the preferred defensive positioning on any AI pullback. Is AI momentum starting to cool? BofA weighs in Goldman expects lower but still attractive stock market returns in 2026 Morgan Stanley CIO survey: Why AI hype isn't boosting 2026 IT budgets
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