BofA warns AI boom faces "double-edged sword" risks; downgrades semiconductors

Bank of America strategists warned on Feb. 20, 2026, that the artificial intelligence narrative is shifting from an "upside-only" event to a "double-edged sword," citing risks of profit cannibalization and overinvestment. The firm downgraded the semiconductor sector to Underweight, noting stretched valuations and rising corporate bond spreads for hyperscalers. BofA projects a 15% downside for European equities by Q2 2026 and argues that consensus estimates for 17% earnings growth clash with record-high corporate margins. U.S. economic data showed weakness, with Q4 2025 GDP growth at 1.4% and three-month payroll growth at anemic 0.1%.