Bank of America says the current AI data-centre boom is fundamentally different from the dot-com bubble, despite concerns about excessive spending and stretched valuations.
Dow Jones/Market Watch convey the info. In summary:
BofA said big tech firms are investing heavily in AI infrastructure to defend market share and capture new revenue streams, even before related earnings arrive. The analysts warned of “some risk of overbuilding” but see key differences from past manias.
- First, cloud providers are running their systems at high utilisation, with Nvidia’s three-year-old Hopper chips still in strong demand — unlike the “dark fibre” glut of the late 1990s.
- Second, AI spending is cash-flow funded, not debt-fuelled, with top providers generating over 30% of operating cash flow against about 25% capex intensity.
- Third, the macro backdrop is more supportive, with rate cuts expected instead of tightening cycles that preceded earlier crashes.
- And finally, valuations are far healthier: Nvidia trades at around 29× 2026 earnings, well below its earnings-growth rate and a fraction of dot-com-era multiples.
BofA said it remains “vigilant but optimistic” on chipmakers, naming Nvidia, Broadcom, AMD and Credo as preferred picks. The bank sees US/China tariff tensions, rather than a speculative bubble, as the biggest near-term risk.
