After a choppy stretch for technology shares, a fresh call from Bank of America is keeping the artificial intelligence trade in focus. The bank argues that momentum in AI-linked companies could last well into 2026, despite recent market pullbacks and worries over stretched valuations.
The view arrives as investors reassess earnings, data center spending, and demand for new AI products across chips, software, and services. It also comes as central banks weigh interest rate cuts, adding another variable for growth stocks tied to AI buildouts.
The AI trade may still have room to run into 2026.
Market Snapshot and Recent Pullback
AI leaders surged through late 2023 and much of 2024, led by chip designers and suppliers tied to data center upgrades. Gains cooled in recent weeks as profit-taking and rotation hit high-growth names. Some investors questioned whether orders for accelerators and networking gear had moved ahead of actual end-user demand.
Even so, the long-term spending cycle tied to AI training and inference remains a key driver. Large cloud platforms continue to scale data centers, while enterprises test AI copilots and automation tools. The result is a debate about timing rather than direction.
What Is Fueling the 2026 Call
Bank of America’s stance rests on a few pillars. Companies are still early in deploying generative AI in production settings. The buildout of compute, memory, and networking needs more time to meet demand. Software rollouts depend on reliable infrastructure and better models.
- Cloud providers are guiding higher capital spending tied to AI capacity.
- New product cycles in chips and AI PCs may support unit growth.
- Enterprises are moving from pilots to paid deployments.
Analysts also point to a widening list of beneficiaries. Semiconductor firms provide accelerators, packaging, memory, and power solutions. Equipment makers supply cooling and power systems for dense racks. Software vendors seek to monetize AI assistants and developer tools through subscriptions.
Voices From the Street and the Skeptics
The bank’s note echoes a common theme among bullish strategists. They argue that spending on AI infrastructure is tracking multi-year plans by cloud and social media platforms. That spending may not move in a straight line, but it is still climbing, helped by ad targeting, search, and video applications.
Others urge caution. Bears warn that orders could slow if customers struggle to show fast returns. They also flag supply bottlenecks, rising competition, and the risk of price pressure as new chips arrive. Some CIOs are waiting for clearer productivity gains before scaling purchases.
Earnings, Capital Spending, and Real-World Use
Second-half earnings will test both views. Investors want to see that revenue from AI services is spreading beyond a few tech giants. They are tracking backlog, total contract value, and usage metrics for AI features in office software, coding tools, and customer support.
Meanwhile, capital expenditure plans from major platforms are a key signal. Upgrades to power, cooling, and networking are required to run larger models. If those investments hold, suppliers across the chain could benefit into 2026.
Policy, Costs, and Productivity
Regulation remains a wildcard. Privacy, copyright, and safety rules could shape where and how models run. Clear standards may add costs near term but reduce legal risks later.
The broader economy may also matter. If AI lifts productivity, companies could defend margins even if growth slows. If gains disappoint, budget scrutiny could intensify. Early case studies show promise in software development, marketing, and customer service, but scaling remains uneven.
What to Watch in the Months Ahead
Investors are monitoring a short list of indicators. Unit shipments of AI accelerators and memory. Cloud capex guides. Adoption rates for AI assistants in enterprise suites. And commentary from management teams on return on investment and time to value.
They are also tracking competition. New chips from multiple vendors could ease shortages and reduce costs per unit of compute. That could widen access, but it may pressure margins for suppliers.
Bank of America’s message captures the mood: the trend remains intact, even with setbacks. If earnings and spending plans align, the next leg could stretch into 2026. If not, the trade may need more time to reset.
For now, the case rests on execution. Watch the data centers, the software usage, and the costs. Those signals will decide whether the AI rally has new life or just a pause.
A seasoned technology executive with a proven record of developing and executing innovative strategies to scale high-growth SaaS platforms and enterprise solutions. As a hands-on CTO and systems architect, he combines technical excellence with visionary leadership to drive organizational success.
