Bank of America’s August survey has confirmed that fears of an AI bubble are growing on Wall Street.
About 32% of fund managers suggest that an AI bubble is the biggest risk to markets, even bigger than the current geopolitical turmoil and the inflation risk.
Yet paradoxically, the bets on semiconductor stocks, once the most crowded trade, have fallen sharply from 82% to 53% in just one month. This suggests that smart investors might have already started moving away from AI stocks as talk of a bubble grows.
According to the survey, investors are increasingly shifting towards defensive, value and cyclical stocks, and slowly moving away from high-flying AI trade
About 59% of fund managers are now turning to value, cyclical, and defensive sectors to reduce their exposure to a potential AI downturn, more than twice the share recorded in July.
The survey further notes that nearly two-thirds of investors said they need clearer evidence of AI monetisation before adding more exposure to AI-related stocks.
As AI spending surges, investors are increasingly turning to European stocks over US peers, drawn by the region’s stronger economic outlook.
About 47% of fund managers in a Bank of America Corp. survey expect returns on European stocks to modestly outpace those in the US over the coming year, the highest level since before the Iran war began in February.
The bullish view is underpinned by about 97% of participants saying they don’t expect a European recession, the highest reading since 2007. Meanwhile, more than three-quarters said further stock gains will be driven mainly by earnings upgrades.
“We’re revisiting the pro-Europe theme from the start of the year, which was crudely stopped by the Iran war,” says Andreas Bruckner, a BofA strategist.
India has replaced Indonesia as Asia’s least-preferred stock market in a survey of fund managers by Bank of America Corp., signalling growing caution toward a market that’s among the world’s worst performers this year.
The lack of a clear AI exposure remains the key concern for Indian equities, with weak growth emerging as the next most important risk, according to the survey, which showed 32% of the respondents were net underweight on the nation. Lack of reforms and high valuations also emerged as reasons for the bearish outlook on Asia’s fourth-largest equity market.
In contrast, sentiment improved in Indonesia, with 27% of fund managers reporting being net underweight on the market, down from 32% in July. Taiwan and Japan remain the most preferred regions for investors. A total of 98 panellists with $272 billion of assets responded to the survey’s questions between 7 August and 13 August.
Sanchari Ghosh is an Assistant Editor at Mint with over 12 years of experience in journalism, specialising in personal finance, DLT & DeFi, geopolitics and foreign policy, with a particular emphasis on how these areas intersect. <br>
She writes extensively about how money works in everyday life—helping readers navigate personal finance decisions. <br>
As AI reshapes investing behaviour, capital is increasingly flowing into decentralized ecosystems, redefining how assets are managed, traded, and valued. She focuses on explaining how money flows within frameworks like Distributed Ledger Technology (DLT), DeFi protocols, and crypto markets—while also exploring what the future of money could look like in a trustless, programmable financial world. <br>
She also focuses on immigration-related issues, simplifying complex topics around visas, passports, overseas financial planning, and the many practical challenges Indians face while moving or living abroad. <br>
Alongside personal finance, Sanchari has a strong understanding of international politics, contemporary and historical conflicts, and global state decisions. She closely tracks how geopolitical developments influence economies, markets, and individual financial choices, bringing together finance and global affairs in her reporting. <br>
She began her career as a desk editor, which gave her a strong foundation in news writing. Over time, her interest naturally shifted toward personal finance. Before joining Mint in 2020, she worked DNA, The Times of India, Outlook Money, BloombergQuint, and ETMoney. At Mint, she got an opportunity to expand her coverage to include immigration and geopolitical developments while continuing to closely follow personal finance trends and market movements.As a journalist, she is committed to accuracy, intellectual rigour, and fairness. <br>
She is an English Major and her work took her across cities including Delhi, Mumbai, and Pune. Living independently from an early age gave her firsthand experience in managing life and money on her own. This practical exposure sparked her strong interest in personal finance. <br>
Outside the newsroom, Sanchari is a sports enthusiast who regularly plays lawn tennis and squash. In her younger years, she was also a national-level badminton player.
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