Bitcoin steadies as BofA survey flags AI-bubble risk

Bank of America survey: extreme bullishness; AI bubble tops risks

Investor risk appetite remains at extreme levels, according to bank of America’s Global Fund Manager Survey. Respondents also flagged an AI bubble as the top tail risk. The same survey points to concern about corporate overinvestment and a preference for stronger balance sheets. Together, these results frame a bull market powered by optimism but shadowed by valuation and concentration risks.

The survey’s backdrop includes persistent enthusiasm for AI-linked earnings and infrastructure spending. However, professional allocators acknowledge that sentiment at extremes can amplify drawdowns when leadership stumbles.

Why this sentiment and AI tail risk matter now

Extremely bullish positioning often coincides with lower cash buffers, leaving portfolios more exposed to disappointment. When AI is named the primary tail risk, the implied vulnerabilities are valuation, capital intensity, and narrow breadth.

One corporate implication is a renewed focus on financial discipline. Investors think companies are “overinvesting” and want more attention on balance sheets, as reported by the Australian Financial Review.

Near term, breadth and leadership are pivotal. Deterioration in advance–decline metrics, mega-cap growth falling below key moving averages, or tightening liquidity conditions would challenge the momentum built around AI narratives.

At the time of this writing, NVIDIA traded near $185.76, up about 1.6% intraday, based on Nasdaq real-time data. Such levels contextualize sentiment around flagship AI beneficiaries.

Risk signals and portfolio considerations

Citi Research: bubble conditions and tripwires to monitor

Citi Research classifies U.S. equities as stretched by its historical framework and emphasizes vigilance across positioning, liquidity, leverage, and stress indicators. It adds that large-cap tech slipping below long-term averages would be a material warning.

Citi Research characterizes U.S. equities as a “bubble” by its historical definition and points to two tripwires: a multi-factor Polls Indicator and key moving-average breaks.

Lisa Shalett: narrow leadership raises downside risk

Lisa Shalett at Morgan Stanley Wealth Management highlights that a small cohort has powered most gains and profit growth. This concentration elevates downside risk if mega-cap tech underperforms or misses estimates.

FAQ about Bank of America Global Fund Manager Survey

Why are institutional investors calling AI the top tail risk, and are AI stocks already in bubble territory?

Rich valuations, heavy AI capex, and speculative flows elevate tail risk. Several institutional views suggest froth, with some characterizing conditions as a bubble.

How concentrated is market leadership and why does that increase downside risk if mega-cap tech underperforms?

Leadership is clustered in a few mega-cap tech names. If they lag, index earnings and multiples compress faster, raising downside due to outsized benchmark weights.