Bank of America warns AI boom may repeat past capital cycle risks

Bank of America warned that the artificial intelligence investment boom may follow the pattern of past capital cycles, where intensified competition, falling prices, and overcapacity disappoint investors despite the technology's long-term promise. The warning comes as billions continue flowing into AI infrastructure like data centers and chips, raising questions about returns. The Philadelphia Semiconductor Index has fallen seven straight sessions, about 13% below its recent peak, while average token prices dropped roughly 50% since summer. Analyst Sebastian Raedler noted most major capital cycles historically ended in disappointment even when the underlying technology met expectations. Federal Reserve Chair Kevin Warsh remained optimistic about AI's productivity benefits, though these do not eliminate current financial risks.