Bank of America Warns of Changing Landscape for AI Investments

February 1, 2025 - 12:17

"DeepSeek means peak in AI capex return expectations," warns Michael Hartnett, Bank of America's top global strategist. In a recent analysis, Hartnett suggests that the era of US stock outperformance may be coming to an end, as new challenges arise in the artificial intelligence sector. The rise of DeepSeek, a powerful new player in the AI landscape, is reshaping expectations regarding capital expenditure returns in the industry.

Hartnett emphasizes that investors should be cautious, as the rapid advancements in AI technology may not yield the high returns previously anticipated. Instead, he points to two lesser-known trades that are showing promising upside potential, indicating a shift in market dynamics. These "quiet" trades could offer better opportunities for growth as traditional AI investments face increasing scrutiny.

The warning from Bank of America serves as a crucial reminder for investors to reassess their strategies in light of evolving market conditions and the potential impact of emerging technologies on investment returns.