According to Bank of America’s latest Global Fund Manager Survey, fear of an AI bubble has overtaken inflation as the biggest perceived tail risk among institutional investors. Nearly half of respondents now rank AI as their primary concern, a sharp jump from the previous month, while inflation worries have eased.
What I found more interesting, however, is that investors remain almost evenly split. Roughly half believe AI valuations are still supported by fundamentals, while the other half think the market has become overly optimistic. In other words, there is plenty of debate but very little consensus.
The survey also suggests that investors are far less concerned about rising bond yields, geopolitical tensions or slowing Chinese growth. Whether that proves to be complacency or confidence remains to be seen.
Over the coming days, I will be meeting investors across a number of engagements. Beyond discussing markets and portfolios, I will be interested to gauge the mood in the room. Has greed finally given way to fear, or is everyone simply worried that someone else is making more money than they are? As always, investor sentiment can change much faster than the fundamentals.