BofA likens AI rally to China WTO boom, stays negative on European equities

On 29 May 2026 Bank of America strategists published a cautious note arguing that the AI-driven margin expansion resembles China’s post-WTO profit surge rather than the dot-com era. Global 12-month consensus margins ex-tech have reached ~12 %, a level the bank believes is vulnerable to rising depreciation, supply growth and political backlash. The assessment follows the ECB’s 26 May warning that private-credit financing of the AI boom could threaten financial stability, reinforcing a cautious institutional stance toward European equities. BofA therefore recommends an underweight in cyclicals versus defensives and highlights downside risks including slower adoption, higher token costs and geopolitical shocks.