Investors Show Growing Skepticism Towards Artificial Intelligence


Investor Skepticism Emerges Recent data from Bank of America Global Research indicates that investors are becoming increasingly skeptical about the excitement surrounding artificial intelligence (AI). This shift is marked by the first outflow from technology stocks in nearly three months. Investors are starting to question whether the AI hype is justified.

Investment Flows Redistribution During the week leading up to September 6, investors notably directed their funds into cash, equities, and bonds while divesting from gold and emerging market equities. Equities experienced $2.2 billion in inflows, but tech stocks saw outflows of $1.7 billion, marking the first such outflow in 11 weeks. This suggests a reevaluation of investment priorities.

Tech’s Past Performance The global equities market has witnessed substantial gains this year, driven in part by mega-cap U.S. technology companies like Microsoft and Nvidia, which have demonstrated their ability to thrive amid the AI boom. However, this upward trajectory has lost momentum over the past month due to rising government bond yields, prompted by the robust U.S. economy. Investors are wondering if tech stocks can sustain their growth.

Investor Sentiments The prevailing sentiment among investors, according to BofA strategist Michael Hartnett, is that a “soft landing” is currently favored. Still, many asset managers with over $150 billion in assets under management believe that a “hard landing” is inevitable. This divergence in views is creating uncertainty in the market.

Market Risks Bank of America identified several potential risks for risk assets in September and October, including sustained high oil prices, a stronger U.S. dollar, rising yields, and tightening financial conditions. These factors are making investors cautious about the future of AI-related investments.

Market Indicators In recent developments, Brent crude oil prices surged to their highest level since November, while the U.S. dollar reached its peak since March. The dollar is also on course for its longest weekly winning streak in nine years. These market indicators are affecting investment decisions regarding AI and tech stocks.

Cash and Bonds The data indicates a net inflow of $4 billion into bonds, alongside a substantial $68.4 billion inflow into cash. This influx into cash represents the largest in nine weeks. Investors seem to be seeking safer investment options amid AI uncertainties.

Outlook Bank of America remains cautious about risk assets and expresses readiness to sell if financial conditions ease due to negative payrolls. Investors are closely monitoring economic indicators for clues about the future direction of AI investments.


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