Bank of America Says Investors Are Overplaying AI and Underestimating Consumers

• Goldman Sachs forecasts hyperscaler AI spending will reach $1.2 trillion in 2027 (up from $800 billion in 2026) and $1.4 trillion in 2028, representing a 54% jump in capex in 2027 followed by 12% growth in 2028
• Investment positioning shows AI-vulnerable sectors like information technology services, consumer finance and software trading near record lows relative to consumer discretionary stocks
• Despite economic pressures, consumers continue spending by seeking deals, buying store brands, and leveraging digital commerce rather than cutting back entirely

Summary: Bank of America Advises Shift from AI to Consumer Stocks

Key Recommendation:

Bank of America strategists, led by Savita Subramaniam, issued a note on October 5, 2026, urging investors to pivot from AI-linked stocks to consumer-driven spending plays, arguing that AI investments are overvalued while consumer spending potential is underestimated.

Market Positioning:

Current investment positions heavily favor AI, with "AI disruptees" including information technology services, consumer finance, and software trading near record lows. Industrial stocks are at record highs relative to consumer discretionary stocks, indicating AI spending expectations are already priced in.

AI Investment Data:

• Goldman Sachs strategists project the five largest U.S. hyperscalers will spend $1.2 trillion in 2027, up from $800 billion in 2026 (54% increase)
• 2028 spending forecast: $1.4 trillion (12% increase)
• Investor funds have shifted from cryptocurrency to AI investments in recent months

Consumer Spending Trends:

Despite concerns about discretionary spending shrinkage, consumers demonstrate resilience through:

• Strategic cost management (store brands, price checking, value retailers)
• Income diversification and bill negotiation
• Continued spending on priorities despite rising costs
• Digital commerce adoption to find deals

Investment Implication:

Bank of America warns against underestimating U.S. consumer appetite, suggesting that capital expenditure strength may be fully priced into current markets. The firm recommends selective repositioning toward consumer-focused investments, as the market may be overly concentrated in AI-related plays while overlooking consumer sector opportunities.