Bank of America survey: The AI cycle is still in the "boom" phase, FOMO continues to drive the market, but semiconductors have become the "most crowded trade."

Bank of America Corp's latest monthly fund manager survey shows that the upward trend of artificial intelligence (AI) stocks is expected to continue, with most investors believing that the fear of missing out (FOMO) mentality is still dominating this trading theme. The survey covered investors managing a total of $465 billion in assets from June 5 to June 11. "Boom" instead of "euphoria": Most fund managers still bullish on AI market The survey shows that around 56% of global fund managers chose the word "boom" to describe the current stage of the AI cycle. This usually indicates that the market's upward trend is accumulating momentum and attracting more investors out of fear of missing out. Only 21% of respondents believe that the industry has entered the "euphoria" stage, where stock prices have been pushed to extreme levels; another 9% of respondents describe AI as being in the "profit-taking" stage. These survey results are consistent with recent market performance. Despite a sharp sell-off in the AI sector on June 5, with the Philadelphia Semiconductor Index plummeting more than 10% in a single day and the Nasdaq falling over 4%, the market quickly rebounded. On Monday, the Philadelphia Semiconductor Index surged by 5.45% to reach 14,099 points, surpassing its previous all-time high and setting a new closing high, with individual stocks like Micron Technology, Inc. (MU.US), ARM (ARM.US), and Intel Corporation (INTC.US) seeing gains of over 200% year-to-date. Semiconductors become the "most crowded trade in history," investors quietly reducing positions However, the survey also revealed deeper concerns among investors about the technology sector. Four out of five (80%) respondents believe that buying and holding global semiconductor stocks is the most crowded trade in the current market, setting a new record high in the survey's history. This signal reflects extreme concentration of funds in the AI hardware sector. Cash holdings are also at historic lows, indicating that institutional equity asset allocation remains high, with overall risk appetite not significantly diminishing. Although the AI narrative remains strong, investors have begun defensive position adjustments. Overall, fund managers have slightly reduced their overweight position in the technology sector from 33% to 26%, and the overweight position in global stocks has also decreased from 50% to 38%. Bubble controversy heats up: Giant IPOs and concentration risk This has led to the controversy over the AI bubble continuing to escalate. Bank of America's Chief Strategist, Michael Hartnett, had previously issued a strong warning, stating that the market bubble driven by the current AI theme is the largest since the 19th century railroad bubble. He pointed out that if upcoming tech giants like SpaceX (SPCX.US) and OpenAI are combined with existing AI leaders in calculations, the market concentration in the AI sector will reach around 48%, surpassing the concentration levels of the "Roaring Twenties" of the 1920s, the "Nifty Fifty" of the 1970s, and the TMT bubble of the 1990s. During the survey period (June 5 to 11), SpaceX completed a historic IPO on the Nasdaq. This unprofitable company debuted with a valuation of $1.8 trillion, and its stock price continued to rise significantly after going public, closing up 19.6% on June 15, pushing its total market value to $2.5 trillion and further intensifying concerns about the bubble in AI and tech stocks. Meanwhile, legendary hedge fund manager and known as the "Boston Buffett," Seth Klarman, has recently issued a stern warning about the AI investment frenzy, stating that market valuations are showing clear signs of a bubble, and his funds do not participate in investments in companies like OpenAI and Anthropic, large language model companies.