Bank of America strategists report that the period of easy gains in AI-related investments is concluding. This shift occurs as major cloud operators, including Microsoft, Alphabet, and Amazon, continue to increase capital expenditure on infrastructure despite growing market skepticism regarding potential returns.
BofA projects capital expenditure for US hyperscalers to reach approximately $795 billion in 2026 and nearly $1,08 trillion in 2027. By June 2026, these companies trailed the S&P 500 index by nearly 15% year-to-date, signaling investor concern over the profitability of these massive infrastructure investments.
Financial data indicates that hyperscalers are heavily reliant on debt, with a capex-to-free-cash-flow ratio reaching approximately 94%. This leaves a narrow margin for error should AI monetization efforts fail to meet expectations or arrive later than anticipated.
The concern is shared by institutional investors. In an August 2026 survey conducted by BofA, 38% of global fund managers identified capital spending by AI hyperscalers as a potential source of systemic credit risk. By September, AI spending dominated 80% of client meeting discussions.
