Key Takeaways
- Bank of America strategists argue that investors should begin shifting focus from AI‑linked capital expenditures to consumer‑driven spending, warning that AI capex may already be fully priced in.
- The firm notes that “AI disruptees” – IT services, consumer finance, and software – are trading near record lows relative to industrial stocks, while discretionary consumer spending remains resilient.
- Goldman Sachs projects AI infrastructure spending by the five largest U.S. hyperscalers to hit $1.2 trillion by 2027 and $1.4 trillion by 2028, underscoring the scale of current capex commitments.
- Consumer behavior data from Visa and PYMNTS show shoppers are finding ways to stretch budgets—seeking deals, buying store brands, and using digital tools—even amid rising costs.
- The shift from crypto to AI investments reported by The Wall Street Journal illustrates how capital can quickly re‑allocate when a theme gains momentum, suggesting a similar rotation could occur toward consumer‑linked equities.
Investors Urged to Pivot from AI Capex to Consumer Spending
Bank of America strategists, led by Savita Subramaniam, warned in a Monday note that it may be time for investors to “selectively pivot” away from the heavy concentration of capital expenditures tied to artificial intelligence. As reported by Bloomberg, the strategists wrote, “We think it’s time to selectively pivot, as it is dangerous to underestimate the appetite of U.S. consumers, and capex strength may be more priced in than not.” Their view stems from the observation that the market has already baked in both the surge in AI‑related spending and the concurrent pull‑back in discretionary consumer outlays.
AI Disruptees Trading at Lows While Industrials Soar
The Bank of America team pointed out that sectors typically seen as beneficiaries of AI disruption—information technology services, consumer finance, and software—are trading near record lows relative to industrial stocks. In contrast, industrial equities have climbed to record highs when measured against consumer discretionary peers. This dislocation, the strategists argue, signals that the market may be over‑weighting AI capex while under‑estimating the durability of U.S. consumer demand.
Goldman Sachs Forecasts Massive AI Infrastructure Outlays
Adding context to the capex debate, Goldman Sachs Group strategists projected that the five largest U.S. hyperscalers will spend $1.2 trillion on AI infrastructure by 2027, up from roughly $800 billion this year. After a 54 % jump in hyperscaler capital expenditures in 2027, the team expects a 12 % increase in 2028, pushing total spending to $1.4 trillion. These figures, cited in a Bloomberg report, illustrate the sheer magnitude of current AI investment plans and lend weight to the Bank of America caution that much of this outlay may already be reflected in asset prices.
Consumer Resilience Evidenced by Visa and PYMNTS Data
Despite macro‑economic headwinds, consumer spending shows signs of adaptability. Visa reported in June that shoppers worldwide continue to make discretionary purchases, seeking deals often facilitated by digital commerce. Visa Chief Economist Wayne Best emphasized in a press release that “consumers are finding more ways to compare prices and stretch their budgets.” Parallel findings from PYMNTS in August revealed that consumers are trimming selected extras, opting for store brands, checking prices in‑aisle, and shifting grocery spend toward value‑focused retailers. Some are also supplementing income, negotiating bills, and adjusting payment timing to preserve essential outlays.
Wall Street Journal Highlights Rapid Capital Rotation from Crypto to AI
The shifting sentiment is not unprecedented. The Wall Street Journal reported in August that investors and hedge funds had moved capital “from putting their money into cryptocurrency to investing in AI.” This migration helped fuel the dramatic surges seen in chipmakers and other AI‑linked stocks, mirroring the speculative rallies once associated with the crypto market. The Journal’s observation underscores how quickly market enthusiasm can re‑allocate when a new theme captures investor imagination—a dynamic that could now reverse toward consumer‑oriented equities if the Bank of America thesis proves correct.
Implications for Portfolio Construction
Taken together, the evidence suggests a potential inflection point. While AI infrastructure spending remains enormous and will likely drive earnings for semiconductor and cloud‑computing firms for years to come, the valuation gap between AI‑heavy sectors and consumer‑discretionary names may be narrowing. Investors who heed the Bank of America advice might consider increasing exposure to retailers, consumer‑finance companies, and brands that benefit from price‑sensitivity and digital‑shopping trends, while maintaining a selective stance on AI capex plays that could be vulnerable to a pull‑back if consumer demand proves more resilient than anticipated.
Conclusion
The current market narrative is dominated by massive AI capital commitments, yet signals from both strategic analysts and consumer behavior data point to a growing appetite among U.S. shoppers to sustain spending through savvy budgeting. As Bank of America’s Savita Subramaniam and her team cautioned, underestimating that appetite could be costly. Investors may therefore benefit from a balanced approach: retaining core AI exposure for long‑term growth while selectively pivoting toward consumer‑driven assets that could capture the next wave of market leadership.
Note: All quoted passages are drawn directly from the source material cited in the original text.
Bank of America Says Investors Are Overplaying AI and Underestimating Consumers
