Bank of America warns investors that AI infrastructure spending faces diminishing returns on capital as deployment efficiency plateaus.

The AI trade made plenty of investors look brilliant. Bank of America strategists think the effortless part of that story is ending.

BofA's strategists warn that investors will have a harder time finding easy gains from AI-related investments. The caution comes as the largest spenders on AI infrastructure continue to increase their capital commitments even as the market grows skeptical those investments will deliver expected returns.

**The Numbers Behind the Caution**

BofA projects US hyperscaler capital expenditure at around $795 billion in 2026 and nearly $1.08 trillion in 2027. Hyperscalers—the giant cloud operators like Microsoft, Alphabet, and Amazon—pour this capex into physical infrastructure: the data centers and hardware that AI models require.

The stock market has reflected this skepticism. By June 2026, US hyperscalers trailed the S&P 500 by nearly 15% year-to-date. A BofA equity strategy note from that month warned the AI-driven rally might be losing momentum and pointed to a troubling pattern: corporates are rationing their AI usage and shifting toward cheaper models. When paying customers trade down, the market proves more competitive than many expected, and premium pricing becomes harder to defend.

**Fund Managers Growing Nervous**

This unease extends well beyond BofA's strategy desk. In the bank's August 2026 Global Fund Manager Survey, 38% of respondents identified AI hyperscaler capital spending as a likely source of systemic credit risk. By September, AI spending dominated 80% of BofA's client conversations, often drawing comparisons to historical tech booms—an analogy that rarely surfaces when confidence is high.

The financing picture heightens the concern. Hyperscalers are funding their capex through debt, reaching a capex-to-free-cash-flow ratio of approximately 94%. This leaves little daylight between spending and available cash, offering thin protection if returns arrive later or smaller than planned.

**What This Means for Investors**

The nearly 15% underperformance by June already suggests recalibration is underway. Investors increasingly reward evidence of revenue and margin generation over spending itself.

The credit dimension deserves close attention. With hyperscalers leveraged at a 94% capex-to-free-cash-flow ratio and 38% of fund managers flagging systemic credit risk, any stumble in AI monetization could matter to bond investors and lenders, not just shareholders.

Watch three signals in coming quarters: whether corporate customers continue rationing AI usage, whether pricing resistance deepens, and whether hyperscaler capex guidance continues climbing toward the roughly trillion-dollar levels BofA has modeled.