Fresh Survey Stokes AI Bubble Fears. How to React.

• AI-related stocks have accounted for an estimated 90% of S&P 500 total capital expenditure growth since November 2022, according to JPMorgan analysis
• Major AI hyperscalers (Meta, Alphabet, Amazon, Microsoft) are all down year-to-date and underperforming the broader market
• Analysts suggest diversifying into international stocks, value stocks, and bonds as potential hedges against AI bubble risks, noting these assets have outperformed AI stocks and the Nasdaq-100 in 2026

Market Summary: AI Bubble Concerns Emerge as Fund Managers Turn Skeptical

Key Developments

A Bank of America Global Fund Manager Survey reveals a dramatic sentiment shift regarding corporate capital expenditure spending, particularly in AI-related investments. For the first time in 20 years, professional fund managers believe companies are overinvesting in capex—a reversal that occurred within just the past three months.

Critical Data Points

• AI dominance: JPMorgan estimates AI-related stocks account for 90% of S&P 500 capex growth since November 2022
• Market performance: Major AI stocks are underperforming year-to-date versus the S&P 500
• Meta Platforms: -2.33%
• Alphabet: -0.87%
• Amazon: -2.61%
• Microsoft: -0.43%
• Nvidia: -2.9%

Companies and Sectors Affected

Major hyperscalers—Meta, Alphabet, Amazon, and Microsoft—are experiencing pressure as investors question whether massive AI data center and infrastructure investments will generate adequate returns. The tech-heavy Nasdaq-100 is also underperforming.

Market Implications

The sentiment shift suggests growing concerns about an AI investment bubble. Fund managers are questioning whether the enormous capital deployed into AI infrastructure will deliver expected payoffs, potentially signaling a turning point in the multi-year AI boom.

Investment Recommendations

Analysts suggest diversification strategies to hedge against AI bubble risks:

• International stocks (Vanguard Total International Stock ETF)
• Value stocks (Vanguard Value ETF)
• Bonds (Vanguard Total Bond Market ETF)

All three alternatives have outperformed AI hyperscalers year-to-date. Vanguard projects these asset classes offer superior risk-return profiles for the next 5-10 years compared to technology stocks.