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Fund managers are worried about AI overinvestment. Bank of America is worried about fund managers overinvesting.

For the first time ever, fund managers surveyed by Bank of America think companies are investing too much.

Luke Kawa

For the first time ever, fund managers surveyed by Bank of America think companies are investing too much.

“Bad news…1st time in 20 years investors say companies ‘overinvesting’ (read ‘slow down, hyperscalers’),” Chief Investment Strategist Michael Hartnett wrote, commenting on the results of BofA’s monthly fund manager survey. “Asked about the biggest ‘tail risk’ for the economy and the markets, 45% of FMS investors said ‘AI bubble’ (up from 33% last month).”

BofA capex overinvesting

Now, what this really shows, as Hartnett alludes to, is a very concentrated industry-specific concern around the aggressiveness of the AI build-out. Over on Bluesky, Bespoke analyst George Pearkes flagged that net private investment as a share of US GDP has effectively been a flat line for years.

“Just shows how tech-centric investors are. AI of course might be over-investing but the non-tech economy is stagnating or in recession and definitely isn’t overinvesting,” added Conor Sen, founder of Peachtree Creek Investments. “Office construction is weak, residential construction is weak, the freight industry is in recession, autos are pulling back on some EV spending.”

Fund managers would prefer that companies improve their balance sheets or return more cash to shareholders rather than boost business investment. That would certainly be a shift in what’s been rewarded in the stock market.

Year to date, a basket of the most capex-intensive stocks in the S&P 500 compiled by Goldman Sachs is up over 21%, outperforming baskets of companies with strong balance sheets and high shareholder returns by about 14 and 5 percentage points, respectively. Firms with high levels of investments have also bested these other cohorts over the past one and three months.

The irony about this survey is that while it says fund managers purport to be worried about overinvestment, if anything, BofA suggests that the overinvestment they should be worried about is their own: average cash levels among those surveyed dipped to 3.7% from 3.8%.

“Note cash levels of 3.7% or lower has occurred 20 times since 2002, and on every occasion stocks fell and Treasuries outperformed in the following 1-3 months,” says Hartnett, who called this low level of dry powder a “sell signal.”

BofA cash levels

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Lucid cuts 12% of its US workforce in a profitability push

EV maker Lucid announced on Friday it is laying off 12% of its US workforce as part of its efforts to improve profitability.

This is Lucid’s third round of layoffs since March 2023. At the end of 2024, the company said it had 6,800 employees globally.

“This difficult but necessary decision was made to improve operational effectiveness and optimize our resources as we continue on our path toward profitability,” interim CEO Marc Winterhoff told employees in an email published by Business Insider. The company has been without a permanent CEO since February 2025.

Lucid has worked to boost its cash reserves in recent months. Late last year it announced plans to raise $875 million through a private offering of convertible senior notes due in 2031.

“This difficult but necessary decision was made to improve operational effectiveness and optimize our resources as we continue on our path toward profitability,” interim CEO Marc Winterhoff told employees in an email published by Business Insider. The company has been without a permanent CEO since February 2025.

Lucid has worked to boost its cash reserves in recent months. Late last year it announced plans to raise $875 million through a private offering of convertible senior notes due in 2031.

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The Supreme Court’s tariff ruling isn’t sweeping relief for automakers, but it isn’t nothing either

The Supreme Court on Friday struck down a significant chunk of President Trump’s tariffs, but the decision isn’t a cause for automakers to fully exhale.

Friday’s ruling relates to tariffs imposed under the International Emergency Economic Powers Act and not Section 232. The 25% tariffs on automobiles and auto parts were imposed under Section 232, so those tariffs remain in place.

Still, it’s worth noting that automakers including Ford, GM, and Stellantis aren’t completely on the outside looking in. IEEPA tariffs did cover certain machinery, lower-cost raw materials, and components, which account for a small chunk of automaker production costs.

According to the Center for Automotive Research, IEEPA tariffs account for about $250 per vehicle for the big three Detroit automakers, or $902 million in costs. That’s a far cry from the Section 232 tariff impact of $4,240 per vehicle, per the think tank, but it’s not nothing.

The modest bump in auto stocks compared to retailers on Friday reflects the light relief.

Still, it’s worth noting that automakers including Ford, GM, and Stellantis aren’t completely on the outside looking in. IEEPA tariffs did cover certain machinery, lower-cost raw materials, and components, which account for a small chunk of automaker production costs.

According to the Center for Automotive Research, IEEPA tariffs account for about $250 per vehicle for the big three Detroit automakers, or $902 million in costs. That’s a far cry from the Section 232 tariff impact of $4,240 per vehicle, per the think tank, but it’s not nothing.

The modest bump in auto stocks compared to retailers on Friday reflects the light relief.

markets
Luke Kawa

Nvidia nears $30 billion investment in OpenAI’s funding round, the FT reports

Nvidia is close to investing $30 billion in OpenAI as part of its long-discussed funding round, per the Financial Times.

Bloomberg had previously reported that Nvidia would be investing $20 billion in this round.

The FT says that this investment will effectively be replacing a bigger planned pact between the two companies. The Wall Street Journal had originally reported in late January that Nvidia’s investment of up to $100 billion in OpenAI, which was announced in September, had “stalled” amid private criticisms of the ChatGPT maker by CEO Jensen Huang.

As Microsoft, SoftBank, or Oracle could tell you, being viewed as overly exposed to OpenAI has not been a boon for stocks in recent months.

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