Investors are reducing their bets on semiconductors and artificial intelligence as concerns about an AI bubble grow. Bank of America’s August survey shows 32% of fund managers see AI as the biggest market risk, ahead of inflation and geopolitics. Exposure to semiconductor stocks fell sharply from 82% in July to 53% in August.
Managers are shifting towards value, cyclical and defensive stocks, with 59% preferring these safer options compared to 29% last month. European equities are gaining favour, with 47% of respondents expecting Europe to outperform the United States, supported by stronger economic outlook and fewer recession worries.
India has become Asia’s least-preferred market, replacing Indonesia, with 32% net underweight positioning. Weak growth, limited AI exposure, slow reforms and high valuations are driving foreign investors away. Indonesia’s sentiment improved slightly, while Taiwan and Japan remain the most preferred markets in Asia.
The survey covered 98 panellists managing $272 billion between 7 and 13 August. Investors are cautious about AI until clearer evidence of monetisation emerges. Defensive strategies and earnings upgrades are expected to guide near-term gains, especially in Europe, while India faces extended foreign outflows that may continue into 2027.
