Concerns over an artificial intelligence investment bubble have overtaken inflation and geopolitics as the dominant tail risk among global fund managers, according to Bank of America’s August Global Fund Manager Survey.
The survey, released on Tuesday, found that 32% of respondents identified AI as the biggest systemic risk, marking the first time AI has led the ranking since the metric was introduced. Semiconductor stocks, once the most crowded trade with 82% of managers overweight in July, saw positioning drop to 53% in August. Cash levels among fund managers fell to 3.5%, the lowest since 1998, triggering Bank of America’s contrarian sell signal—a level typically associated with market peaks.
Expectations for a “no landing” economic scenario reached 56%, the highest since February 2022, while global equity allocations remained at a net 56% overweight, the most aggressive since November 2021. Despite growing caution, 71% of managers do not anticipate cuts to hyperscaler capital expenditures in 2024, and Bank of America raised its forecast for AI-related spending by hyperscalers to $3.6 trillion through 2028, up 17% from the prior month.
In Asia, fund managers are increasingly rotating into defensive, value, and cyclical stocks, with 59% doing so to hedge against potential AI downside—more than double the share in July. Nearly two-thirds of Asian managers require clearer evidence of AI monetization before increasing exposure to the sector.
Technical indicators for the Nasdaq 100 suggest stretched conditions, with daily and weekly StochRSI readings in extreme overbought territory at 95.96 and 92.41, respectively. The monthly Relative Strength Index stands at 70.8, while the Monthly Average Directional Index confirms a strong trend at 43.3. NVIDIA, a bellwether for AI investment, traded down 2.1% premarket to $220.38, though Bank of America maintained a Buy rating with a $350 price target, citing a $105 billion commitment to OpenAI discussed with management.
Bank of America’s survey reflects a broader shift in sentiment as investors reassess the sustainability of AI-driven gains amid elevated valuations and technical exhaustion signals.
