BCA Research has revised its asset allocation call, upgrading equities and reducing its preference for cash. The firm argues that the current investment cycle is being propelled by corporate capital expenditures tied to artificial intelligence initiatives rather than by consumption.
In a note, chief strategist Juan Correa emphasized that capital expenditure - not consumer spending - is the key driver of economic cycles in the present environment. Correa characterized the AI-related investment wave as endogenous, meaning firms are committed to spending regardless of consumer health.
To quantify the scale of that corporate commitment, BCA points to hyperscaler investment: over the past 12 months these large cloud and infrastructure companies have poured more than $400 billion into data centers. The firm also highlighted a sharp rise in the combined remaining performance obligations of Alphabet, Microsoft and Amazon, which climbed from $596 billion in the first quarter of 2025 to $1.5 trillion in the first quarter of 2026.
At the same time, BCA warned that the closure of the Strait of Hormuz is exerting a separate, downward pressure on global consumers by draining inventories and squeezing household budgets. That development, the firm said, removes the prospect of easy monetary policy and is weighing more heavily on the European Union than on the United States.
Reflecting those factors, BCA adjusted regional equity recommendations: European equities were downgraded from overweight to underweight, Australia was moved from overweight to neutral, and U.S. equities were upgraded to neutral.
Sector positioning also changed. BCA upgraded Communication Services from neutral to overweight, naming Meta and Google as primary plays to capture upside from the AI rally.
"We suspect that we could be in the early innings of a violent blow-off rally in AI-related stocks," Correa wrote.
On positioning, BCA observed that investor exposure has fallen sharply since the onset of the conflict, creating what the firm called a "wall of worry" that markets must climb. The note added that the administration's sensitivity to falling markets further skews the distribution of returns to the upside.
The firm's actions - shifting regional weights and moving into AI-sensitive sectors - reflect a view that heavy, ongoing capex by large technology firms can sustain market momentum even as consumer-facing pressures and regional disruptions sap demand.
Relevant tickers noted in the note: MSFT, GOOGL, GOOG, AMZN, META.