The AI boom is spilling into new corners of the market, with Bank of America pointing to fresh beneficiaries and emerging casualties.
In a new CNBC interview, Savita Subramanian, head of equity and quantitative strategy at Bank of America Securities, says the next phase of AI investment is expanding beyond chipmakers into industries powering and enabling data centers.
She says the “AI train” that began with semiconductors is now driving momentum in sectors she believes will capture the next leg of earnings growth.
“I mean, where we’re seeing this sort of AI train go… it’s obviously stopped at power and utilities, and we’ve seen a big rerating in some of those stocks. And now I think it’s moving into more of the areas around tooling, industrials, getting all the generators into those data centers that need to be tooled up at this point.”
On top of tooling and industrials, Subramanian says healthcare is emerging as a major AI play thanks to rapid productivity gains across labor-intensive segments.
“We just upgraded health care from underweight to overweight about a week ago on the premise that it’s seeing less margin risk. It’s actually one of the sectors where the use cases around AI helping efficiency are really, really abundant. Our analysts have written a lot about this theme. So I think there are, you know, kind of different areas of the overall economy that could benefit.”
But Subramanian warns that the same AI wave driving corporate gains could weigh on the labor market, specifically white-collar workers.
“When I think about the potential victims, I think what’s disturbing is we are in an environment where one of the biggest contributions to consumption growth over the last few decades, i.e., white-collar services, professionals, in that age bracket of 25 to 45 — that group is, it’s harder and harder to see jobs. You’re seeing less new jobs created in that cohort.”
She says weakening employment among white-collar professionals may slow consumer spending, prompting the bank to cut its outlook for discretionary stocks.
“So I think that the consumption story becomes a little bit harder from here, and we’re starting to see that in some of the data. So that’s something I would watch, and we just downgraded consumer discretionary from overweight to equal weight.”
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