Bank of America warns that the AI investment boom reveals capital cycle risks

Bank of America warns that the AI investment boom is showing signs of classic capital cycle risks, manifested in a surge in spending, intensified competition, and falling prices.

The capital expenditure expectations of hyperscale cloud vendors have jumped from $330 billion to $1 trillion, roughly equivalent to 3% of the U.S. GDP. Meanwhile, since the summer, the prices of AI tokens have dropped by about 50%, and the increase in usage may not translate into sufficient revenue. The key risk is that AI technology may succeed, but investors could be harmed by over-investment and declining returns.