Why Fund Managers Now Fear AI Capex More Than Iran, Tariffs, or a Recession
If you ask institutional investors, the global economy is heading toward a no-landing scenario – growth remains resilient, inflation fears are receding, and recession risk has nearly disappeared from consensus forecasts. Yet the same investors focus on a less conventional threat—the enormous bill for artificial intelligence. In Bank of America’s July Global Fund Manager Survey, 48% of respondents identified AI hyperscaler capital expenditure as the most likely source of a systemic credit event. They ranked it ahead of private credit, consumer credit, and the more familiar macro risks that have dominated markets in recent years, including the Middle East conflict, tariffs, and recession. The paradox is subtle but notable. Fund managers are optimistic about the economy while growing more anxious about the spending cycle that is powering much of that optimism. Outstanding Spe...
If you ask institutional investors, the global economy is heading toward a no-landing scenario – growth remains resilient, inflation fears are receding, and recession risk has nearly disappeared from consensus forecasts.
Yet the same investors focus on a less conventional threat—the enormous bill for artificial intelligence.
In Bank of America’s July Global Fund Manager Survey, 48% of respondents identified AI hyperscaler capital expenditure as the most likely source of a systemic credit event.
They ranked it ahead of private credit, consumer credit, and the more familiar macro risks that have dominated markets in recent years, including the Middle East conflict, tariffs, and recession.
The paradox is subtle but notable.
Fund managers are optimistic about the economy while growing more anxious about the spending cycle that is powering much of that optimism.
Outstanding Spending, Minimal Direct GDP Impact A record 54% of survey respondents expect a no-landing global economy over the next 12 months, while 39% expect a soft landing.
Only 2% foresee a hard landing.
Lower oil-price forecasts have helped pull down inflation expectations, leaving investors convinced the Federal Reserve can remain on hold rather than resume rate increases.
But the AI investment boom is becoming too large to ignore.
Goldman Sachs estimates that annualized AI-related spending could exceed $800 billion by the end of 2026, lifting investment in equipment and structures across servers, semiconductors, memory, power infrastructure, and data centers.
However, the direct impact to GDP could be modest. “We estimate that AI-related spending will add 0.3pp to true GDP growth, but only 0.1pp to measured GDP growth in 2026,” the bank’s economist Elsie Peng noted.
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The iShares Semiconductor ETF (NASDAQ: SOXX ) has corrected more than 20% from its June peak, meeting the conventional definition of a bear market even as the broader S&P 500 has remained comparatively steady.
For BofA survey respondents, it is a meaningful data point, as 82% called long global semiconductors the world’s most crowded trade.
The selloff has exposed fractures within the AI supply chain.
Investors are favoring the most tangible parts of the buildout—chips, memory, servers and data-center equipment—while punishing downstream software companies whose AI monetization remains uncertain.
International Business Machines Corp. (NYSE: IBM ) weak preliminary second-quarter results offered a sharp illustration.
Its shares plunged after the company acknowledged it had been slow to adapt to spending shifting away from software and toward servers and chips.
Dell Technologies Inc. (NYSE: DELL ), a supplier of AI servers and storage systems, has been viewed as a potential beneficiary of that rotation.
The Chain Reaction The greater risk might now lie in credit.
Corporate spreads remain relatively tight despite the correction in semiconductor shares, suggesting bond investors have not yet priced a material deterioration in AI economics.
Yet the situation could change as second-quarter earnings reports roll in.
Alphabet Inc. (NASDAQ: GOOG ) is scheduled to report on July 22, followed by Microsoft Corp. (NASDAQ: MSFT ) and Meta Platforms Inc. (NASDAQ: META ) on July 29, and Amazon.com Inc. (NASDAQ: AMZN ) on July 30.
Investors will scrutinize whether mounting capex is generating enough cloud, advertising, software and AI revenue to justify the investment.
If the hyperscalers disappoint, or signal that returns on AI infrastructure remain elusive, the consequences may spread beyond technology equities.
Since fund managers are light on cash, a repricing event could reach leveraged suppliers, data-center projects, private-credit vehicles and companies approaching refinancing.
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