Concerns about corporate overinvestment are really concerns about one thing: whether massive AI spending by tech giants will pay off. According to Bank of America’s latest fund manager survey, many investors now want companies to prioritize balance sheet strength over pouring more cash into data centers and infrastructure.
That shift matters because Big Tech capital spending has been a major engine behind some of the market’s hottest performers, particularly memory chip makers and semiconductor equipment firms.
AI spending boom is highly concentrated
Despite fears of runaway corporate spending, the surge is not happening across the economy. The bulk of capital expenditures is coming from a small group of companies, primarily hyperscalers in technology, communication services, and consumer discretionary sectors.
Those investments are fueling demand for suppliers tied to the AI buildout, including companies like Applied Materials $AMAT. If tech giants slow spending, many of these beneficiaries could feel the impact quickly.
Fear of an AI bubble is fading
Interestingly, fewer investors now see an AI bubble as the biggest risk, partly because valuations for the largest spenders have already cooled. At the same time, cash levels among fund managers have ticked up after hitting historic lows, suggesting a slightly more cautious stance.
Yet positioning remains heavily tilted toward risk assets such as equities and commodities, while bonds are underweighted. That crowded bullish positioning may be limiting further gains in the S&P 500.
Too bullish to move higher easily
When most investors are already optimistic and fully invested, it becomes harder for markets to rise further without new catalysts. Strategists note that strong sentiment combined with low cash reserves leaves little dry powder to push prices meaningfully higher.
In other words, the debate over “overinvestment” is less about the entire corporate sector and more about whether a handful of tech giants are spending too aggressively on AI. The future of those bets could determine not just Big Tech’s trajectory, but the direction of the broader market as well.