Bank of America top analyst issues warning: if any tech giant cuts spending, it could trigger a “rotation tsunami” in US stocks

Bank of America star analyst Michael Hartnett issued an upgraded warning for the market in his latest "Flow Show" report on February 15. He pointed out that as AI capital expenditure (Capex) expectations continue to rise, the "AI disruption trade" is spreading from the technology sector to traditional service industries at an astonishing speed. Once a tech giant cuts spending, it will trigger a “rotation tsunami” in the US stock market.

Hartnett noted that capital expenditure expectations for hyperscalers in 2026 have soared to $740 billion. This astronomical figure is not only staggering, but also dangerous. Such frenzied investment will create extreme financial consequences: "This could push the free cash flow of the Mag 7 to zero or even turn negative." To maintain this scale of capital expenditure, tech giants might be forced into a massive bond issuance spree. This means that technology growth stocks, once boasting perfect balance sheets, are now becoming fully “creditized.” If any AI hyperscaler announces a reduction in capital expenditure, it will directly trigger a sharp rotation from tech giants to "Main Street" assets.

Hartnett listed the spread of AI impact over time: “On Monday it was insurance brokers collapsing, Tuesday it was wealth advisors, Wednesday it was real estate services, Thursday it was logistics...” Hartnett also stated that political factors are intensifying this rotation. “If there is no so-called ‘Trump bump’ by then, it is expected that the government will turn to more aggressive ‘affordability’ policies to win the midterm elections.”