AI Spending Bubble Fear Just Hit An All-Time High, BofA Survey Shows

A record number of investors are effectively shouting one word at corporate America: stop. The latest Bank of America Global Fund Manager Survey, led by Chief Investment Strategist Michael Hartnett, shows that nearly a third of respondents now say corporations are "overinvesting" in AI. That's the highest reading on record in data going back to 2005. In other words, confidence in the AI capex boom is starting to crack. Capex ‘Too Hot’ Right Now The February survey – which polled 190 managers overseeing $512 billion in assets between Feb. 6 and Feb. 12 – captures a striking contradiction. On one hand, sentiment is "uber-bullish," as Hartnett highlighted. Investors are the most overweight equities since December 2024 and the most overweight commodities since May 2022. Cash levels sit at just 3.4%, near historic lows, and 40% are underweight bonds, the biggest underweight since September 2022. The Bank of America Bull & Bear Indicator stands at 9.5 — firmly in contrarian "sell" territory. On the other hand, 35% of chief investment officers said they want CEOs to improve balance sheets, up from 26% last month. Only 20% want firms to increase capital spending, down sharply from 34%. The message: growth is welcome, but the spending spree may be overheating. Long Gold Becomes Crowded, AI Bubble Now Seen As Biggest Tail Risk The most crowded trade is now "long gold," cited by 50% of managers for a second straight month. Only 20% named "long Magnificent 7," down sharply from 54% two months ago. Investors expect gold to peak around $6,200 per ounce this cycle, roughly 23% above current levels. Despite gold — as tracked by the SPDR Gold Shares (NYSE:GLD) — surging roughly 70% over the past year, only 31% of fund managers now consider the metal overvalued. When asked about the biggest "tail risk" for markets, 25% of respondents chose an AI bubble. That placed it ahead of inflation at 20% and a disorderly rise in bond yields at 17%. This marks a shift in the risk narrative. In recent years, investors focused on inflation spikes, rate hikes and geopolitical shocks. Now, excess enthusiasm around artificial intelligence spending has taken center stage. When asked about the most likely source of a systemic credit event, 30% pointed directly to AI hyperscaler capex, second only to private equity/private credit at 43%. That suggests investors worry that massive borrowing to fund AI buildouts could strain balance sheets if returns disappoint or growth slows. Yet opinion remains divided. On whether AI stocks are in a bubble, 45% said no, while 44% said yes. Bottom Line Investors are betting on growth, earnings and higher yields while simultaneously flagging AI capex as excessive and potentially destabilizing. That combination, record bullish sentiment paired with record concern over overinvestment, leaves markets walking a tightrope into the first quarter of 2026. Image created using artificial intelligence via Gemini.