Apple's rapid AI-driven spending cycle may be entering a more challenging phase as customers seek lower-cost alternatives and question returns on large technology investments.
Bank of America said the surge in artificial intelligence spending has helped create unusually strong profit expectations across markets, but the bank now sees growing risks to that outlook, according to a June 26 research note. The firm said lower-cost AI models and rising competition could make it harder for companies to sustain premium pricing.
The bank noted that businesses are increasingly evaluating cheaper open-source AI offerings, while new tools may reduce customer dependence on a single provider. Bank of America said those trends could pressure margins as the AI market becomes more competitive.
Bank of America also pointed to investor caution around major technology companies. The firm said U.S. hyperscalers, large cloud-computing providers, have trailed the broader market by nearly 15% since January, which may reflect concerns about future returns on heavy AI-related spending.
Beyond technology, Bank of America maintained a cautious stance on European equities and cyclical sectors. The bank said industries tied closely to the AI buildout, including semiconductors, capital goods, and mining, appear among the most stretched areas of the market, while defensive sectors such as consumer staples may offer relative stability during any AI-driven market pullback.