Catenaa, Monday, October 05, 2026- Bank of America said that investors will find it hard to earn “easy money” by betting on returns from AI-linked capex.
According to Bloomberg, BofA Strategists led by Savita Subramanian wrote in a note that the combination of abundant AI-related spending and shrinking discretionary spending, with the latter spurred by white-collar job losses, is already baked into investment positions.
Going forward, “alpha from buying AI capex beneficiaries and selling white-collar consumption themes may be harder fought,” she said in the note, according to Bloomberg.
The BofA note also said that long-only active funds in IT services, consumer finance and software(also known as AI disruptors) are at near-record lows. Meanwhile, positioning in industrial stocks is near record highs relative to consumer discretionary stocks.
According to BofA, fund managers are most overweight in electronic equipment, instruments and components.
“We think it’s time to selectively pivot, as it is dangerous to underestimate the appetite of US consumers and capex strength may be more priced in than not,” Subramanian said.
Bloomberg News reported last week that BofA said that investors might want to “get bulled up” as the distribution of market risks had shifted to the upside along with strong consumer spending and healthy balance sheets.
Subramanian said that they now see a continued trade down amid white-collar professionals shifting from wants to needs, with high-pay AI disruptor jobs at increased risk.
“The trend is evident in positioning in staples stocks versus discretionary stocks,” she said.
Bloomberg report said that consumer staples and discretionary stocks are underperforming the broader S&P 500 Index in the past 12 months.
However, the report said that the S&P 500 Consumer Staples Index has climbed 4.6% in the period, while a gauge of the consumer discretionary stocks has fallen 3.3%.
Athletic apparel companies Lululemon Athletica and Nike, for instance, are both down about 50% in the past year, according to Bloomberg.
Subramanian said the current positioning is “justified,” as a likely shift to capex from consumption had been a core investment thesis for this year.
In a November year-ahead outlook, BofA had favored “capex over consumption,” with AI-linked spending likely to remain the “ballast.”
