Institutional investors are increasingly worried about an AI bubble, citing high valuations, massive infrastructure spending, and a growing concentration of market value in AI-linked stocks, raising questions about the sustainability of recent gains.
Institutional investors are growing more uneasy about artificial intelligence, with Bank of America’s latest global fund manager survey showing that 45% of respondents now regard an AI bubble as the biggest tail risk to markets, up sharply from 28% the previous month. That puts AI ahead of inflation as the main fear among professional money managers and reflects a wider concern that enthusiasm for the technology has run ahead of fundamentals.
The worries are tied not just to valuation but to the scale of spending needed to sustain the boom. Bank of America said the most crowded trade in global markets remains long positions in semiconductor stocks, while respondents also identified hyperscaler spending on AI infrastructure as the most likely source of a credit event. Analysts have warned that the surge in capital outlays may flatter earnings in the short term without proving durable if the returns fail to materialise.
Goldman Sachs has estimated that AI companies could invest more than $500 billion in 2026 alone, while its broader research points to a continuing shift from cautious experimentation towards faster enterprise adoption. The bank has argued that infrastructure spending is increasingly moving into inference, the stage where AI models are used in real-world applications, and into business deployments rather than only model training.
That spending wave has broader market implications because the S&P 500 is becoming more concentrated. J.P. Morgan Global Research has estimated that the 20 largest stocks now make up about half of the index’s market value, meaning investors buying a broad market benchmark are, to an unusual degree, making a bet on a small group of AI-linked companies. Goldman Sachs has raised its year-end 2026 target for the index to 8,000, but it also noted that scepticism about the durability of AI profits could shape market sentiment even as earnings growth remains strong. Morgan Stanley has gone further, projecting almost $3 trillion of AI infrastructure investment by 2028, with most of that still to come.
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