BCA Research Shifts Strategy as AI Boom Dominates
BCA Research has upgraded its outlook on equities while downgrading cash, arguing that the artificial intelligence investment boom remains the primary force driving global economic growth. This comes even as the Strait of Hormuz closure continues to pressure consumers worldwide.
AI Investment, Not Consumption, Drives Growth
According to chief strategist Juan Correa, capital expenditure—not consumer spending—is currently the key driver of economic cycles. He emphasized that the ongoing AI investment surge is largely self-sustaining, with companies continuing to invest regardless of consumer conditions.
Massive Spending by Tech Giants
Over the past year, major technology firms have significantly increased their investments in AI infrastructure. Hyperscalers have poured more than $400 billion into data centers. Meanwhile, the combined remaining performance obligations of Alphabet, Microsoft, and Amazon surged from $596 billion in Q1 2025 to $1.5 trillion in Q1 2026, highlighting strong future demand.
Global Pressures from Hormuz Disruption
The closure of the Strait of Hormuz is reducing global inventories and putting pressure on consumers. According to BCA, this situation limits the ability of central banks to implement easy monetary policy and is impacting the European Union more severely than the United States.
Regional Allocation Changes
As a result of these dynamics, BCA has adjusted its regional equity allocations. The firm downgraded European equities from overweight to underweight and lowered Australia from overweight to neutral. At the same time, U.S. equities were upgraded to a neutral stance.
Communication Services Sector Upgraded
BCA also upgraded the Communication Services sector from neutral to overweight, identifying Meta Platforms and Alphabet as key beneficiaries of the ongoing AI rally.
Early Stages of a Potential AI Stock Surge
Correa suggested that markets may be entering the early phase of a powerful rally in AI-related stocks, potentially leading to a sharp upside move.
Market Positioning Signals Upside Potential
The firm also noted that investor exposure has declined significantly since the geopolitical tensions began, creating a “wall of worry” that markets often climb. Additionally, sensitivity from policymakers to declining markets may further tilt the risk-reward balance toward gains.
