Fund Managers Alarmed over Corporate Spending Even as Optimism at Five-Year High

Why It Matters

The juxtaposition of heightened optimism with concerns over capex and AI risk could dampen equity valuations and reshape allocation strategies across the market.

Key Takeaways

• Record share see corporate capex overspending.
• AI bubble flagged as top market tail risk.
• Fund managers bullishness peaks at five‑year high.
• Cash balances rose in February, tightening liquidity.
• 162 managers surveyed, indicating broad sentiment shift.

Pulse Analysis

Corporate capital spending has surged in recent quarters, driven by a mix of digital transformation initiatives and aggressive growth targets. While higher capex can signal confidence in future demand, the fund managers’ survey reveals a growing unease that many projects lack clear return pathways. This tension mirrors historical cycles where excessive investment precedes earnings compression, prompting investors to scrutinize balance‑sheet health and cash conversion cycles more closely.

Simultaneously, the specter of an artificial‑intelligence bubble looms large. A quarter of the surveyed managers flagged AI as the primary tail‑risk, reflecting concerns that inflated valuations in generative‑AI startups could spill over into broader market sentiment. The rapid influx of venture capital and soaring valuations have outpaced tangible revenue generation, raising the possibility of a correction that could reverberate through tech‑heavy indices and impact risk‑on portfolios.

Despite these warnings, optimism remains at a five‑year peak, underscoring a paradox where market participants are both bullish and cautious. Rising cash balances in February suggest that firms are beginning to preserve liquidity, potentially tempering the pace of new projects. For investors, the key takeaway is to balance exposure to growth‑oriented equities with a vigilant assessment of capex sustainability and AI‑related valuation risks, ensuring portfolios remain resilient amid shifting macro‑economic dynamics.

Fund managers alarmed over corporate spending even as optimism at five-year high

Fund managers are the most bullish for five years · but cash levels crept up in February.

Published: Feb. 17, 2026 at 7:05 a.m. ET

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A record percentage of fund managers believe corporate America is splurging too much on capital expenditure when returns are uncertain, and a quarter of them regard a bubble in AI as the biggest tail risk for markets.

This was the standout takeaway from Bank of America’s monthly fund managers’ survey released on Tuesday. While the 162 participants polled in the week to Feb. 12 were still “uber‑bullish,” chief investment strategist Michael Hartnett makes the point that “asset price upside is harder when all are positioned for it.”

About the Author

Jules Rimmer – Jules Rimmer is a markets reporter in London. He spent more than 30 years as a trader and stockbroker in financial markets, starting at Salomon Brothers in the Liar’s Poker era, taking roles at ING Barings, Jefferies and ending in emerging markets at Investec. He hung up his headset and pivoted to journalism in 2021.