BCA: AI capital expenditure is expected to continue for another three to five years, while giant IPOs will serve as a warning sign for the overheated market.

In its latest macro report, BCA noted that in Q1 2026, IT investment in software, hardware, and data centers contributed 0.8 percentage points to U.S. real GDP growth, marking a new high this century. When compared to the 1990s tech investment cycle, current AI capital expenditure could still persist for another three to five years. The institution added that improved data center revenue and profit margins have laid the foundation for continued expansion among hyperscale cloud providers. Even if the commercialization of frontier large models faces price wars, falling model usage costs may drive more enterprises to adopt AI, further boosting demand for computing power, servers, electricity, and data centers. However, BCA also warned that a key variable to watch may come from equity supply. The report identifies "mega-IPOs" as a critical alarm for overheated markets: when large new listings surge and financing scales expand rapidly, market liquidity will be siphoned off, and valuation expansion is more prone to stalling. Its historical charts show that within two years of major IPOs, the S&P 500 index has averaged a peak-to-trough drawdown of around 24%. BCA’s judgment is that AI capital expenditure will still underpin earnings and growth, but mega-IPOs, financing conditions, and rising yields will determine when this rally shifts from "earnings-driven" to a "liquidity test."