• AI bubble fears have surged to become the top market risk, with 45% of investors naming it their primary concern.
  • For the first time since 2005, a majority of investors worry companies are overinvesting in AI amid massive capital expenditure.
  • Despite slight improvement, 53% of respondents still believe AI stocks are currently in a bubble.

Investors are growing increasingly nervous about the artificial intelligence boom, with Bank of America's latest global fund manager survey revealing a dramatic shift in market sentiment. The survey, which polls professional money managers overseeing billions in assets, shows AI bubble fears have eclipsed all other market risks, including the previously dominant concerns about rising bond yields and persistent inflation.

The data reveals a stark contrast from just months ago, when only 17% of investors now cite rising bond yields as their top worry, down from its previous position as the number one concern. Similarly, inflation fears have receded to just 16% of respondents. This rapid reprioritization underscores how quickly AI-related anxieties have moved to the forefront of institutional investor thinking.

"What we're seeing is genuine concern about the sustainability of current investment levels," said one portfolio manager who participated in the survey but requested anonymity to discuss the findings candidly. "The trillion-dollar question is whether revenue will materialize to justify these massive data center builds."

The survey uncovered another significant milestone: for the first time since 2005, a majority of investors believe companies are overinvesting. This sentiment is directly tied to the AI capital expenditure boom that has seen technology firms commit unprecedented sums to building out AI infrastructure, even as the timeline for meaningful revenue generation remains uncertain.

While 53% of respondents believe AI stocks are already in a bubble, this represents a slight improvement from last month's record 54%. The persistent high level of bubble concerns suggests institutional investors remain deeply skeptical about current valuations in the AI sector, despite some moderation in outright bearishness.

Bank of America strategists noted that while comparisons to the late-1990s dot-com bubble are inevitable, there are crucial differences in today's market environment. Current price-to-earnings ratios in the technology sector stand at approximately 32 times earnings, significantly below the 91 times earnings seen at the peak of the dot-com mania. Additionally, broader market participation and stronger underlying fundamentals provide some cushion against a repeat of that historical collapse.

The survey findings come as technology companies continue to announce massive AI-related investments, with some analysts projecting trillions of dollars in cumulative spending over the coming years. This capital expenditure boom has created opportunities in infrastructure and small-cap stocks, but the fundamental question of when—and if—these investments will generate adequate returns continues to loom over the market.

Correction: An earlier version of this article misstated the percentage of investors concerned about inflation; the correct figure is 16%.